Costing and Cost Control
Costing and Cost Control tests food cost, prime cost, selling price, variance and inventory control. Expect calculations from stock data and decisions on portion size, menu pricing and waste.
Key formulas
- Cost of food sold = opening stock + purchases − closing stock, adjusted for staff meals and transfers.
- Food cost % = food cost ÷ food sales × 100. Beverage cost is calculated separately.
- Prime cost = food cost + beverage cost + labour cost. Overheads are separate.
- Inventory turnover = cost of food used ÷ average stock. High turnover generally means fresher stock and less tied-up cash.
Worked example
Food sales are ₹2,00,000. Opening stock is ₹20,000, purchases are ₹80,000 and closing stock is ₹25,000. Cost of food sold = 20,000+80,000−25,000 = ₹75,000. Food cost % = 75,000÷2,00,000×100 = 37.5%. If the target is 30%, the excess is 7.5% of sales = ₹15,000. Reasoning: use cost of food sold, not purchases; compare the percentage, then convert the gap into rupees.
Traps
- Using purchases as food cost and ignoring stock movement.
- Omitting staff meals, complimentary items or spoilage.
- Mixing food and beverage percentages.
- Reducing portion size visibly without changing the menu price or specification.
- Treating a high selling price as proof of profit.