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Can cancellation fees be used in calculation of food cost or used as a credit?

Jill Newman, CPA
Financial Advisor
Jill Newman is a Certified Public Accountant (CPA) in Ohio with over 20 years of accounting experience. She has experience working as an accountant in public accounting firms, nonprofits, and educational institutions, and has also honed her communication skills via an MA in English, writing jobs, and as a teacher. She received her CPA from the Accountancy Board of Ohio in 1994 and has a BS in Business Administration/Accounting.

Jill Newman, CPA

Financial Advisor

Expert Answer

When you calculate the cost of each ingredient in each dish be sure to include a proportion of any delivery fees, interest, returns charges or other expenses directly related to purchasing foods, such as cancellation fees.

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Question

If a restaurant had total sales of $348,902, and food sales made up 80% of the total sales, and food cost was 29.34%, what was the cost of food?

Michael R. Lewis
Business Advisor
Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.

Michael R. Lewis

Business Advisor

Expert Answer

Multiply the percentage of food sales (80%) by total sales ($348,902); then multiply the results by the food cost percentage (29.34%) to get the dollar cost of food. The answer is $81,894.28

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Question

How can ingredients like soy sauce or curry be accounted for yet they may be used for different accounting periods?

Jill Newman, CPA
Financial Advisor
Jill Newman is a Certified Public Accountant (CPA) in Ohio with over 20 years of accounting experience. She has experience working as an accountant in public accounting firms, nonprofits, and educational institutions, and has also honed her communication skills via an MA in English, writing jobs, and as a teacher. She received her CPA from the Accountancy Board of Ohio in 1994 and has a BS in Business Administration/Accounting.

Jill Newman, CPA

Financial Advisor

Expert Answer

When you list the ingredients of the dish be sure to include even small amounts of food, including a squirt of ketchup or spoonful of mayonnaise. Don't forget to account for cooking oil, seasonings and garnishes as well. You would take the total cost for each bulk item and divide by the number of uses (squirts, spoonfuls, etc) to get the per use cost. Then multiply this per use cost by the number of uses for that particular dish.

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Question

If I need to make 65% on a food item, what would the formula be?

Michael R. Lewis
Business Advisor
Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.

Michael R. Lewis

Business Advisor

Expert Answer

The price at which food must sell to earn a specific profit is the difference between 100% and the Profit percentage or % Cost of food = 100% - Desired Gross Profit Margin. For example, if you sold $1 of food and made 65 cents, the cost of the food would be 35 cents.

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