1. Chapter 7:
Recipe Costing

2. Recipe Costing Method used to determine the profit on food products
To obtain and maintain maximum profit, a foodservice operation must be aware of four expenses:
Food
Labor
Overhead
Profit
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009

3. Guidelines for Achieving a Greater Profit
Buy comparatively.
Do not always purchase a product with the lowest price.
Keep track of pilferage.
Train employees properly to will help reduce food cost.
Portion food in its proper portion size to control the food cost percentage.
Forecast accurately.
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009

4. How to Cost out a Recipe
Once a recipe has been selected, it needs to be recorded in a format that is easy to use. The form should include:
A. Recipe name
B. Recipe identification number
C. Portion size
D. Yield or number of portions
E. Ingredients
F. Waste percentage
G. Edible portion (EP)
H. As purchased (AP)
I. Unit purchase price
J. Conversion measure
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009

5. How to Cost out a Recipe Cont’d
K. Ingredient cost
L. Preliminary subtotal recipe cost
M. Q factor of 1 percent (Place percentage in this box and then multiply the
Q factor % by the preliminary subtotal recipe cost.)
N. Q factor cost
O. Subtotal recipe cost (Add Q factor cost to the preliminary subtotal recipe cost.)
P. Portion cost (Divide the subtotal recipe cost by the total portions/yield.)
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009

6. How to Cost out a Recipe Cont’d
Q. Additional cost (If this is an `a la carte menu item, leave this box blank; if not, place the portion cost of the other menu items in this box.)
R. Total recipe cost (Add any additional cost to portion cost; if there are no additional costs, the portion cost becomes the total recipe cost.)
S. Desired overall food cost percentage (Retrieve this number from the annual profit and loss statement.)
T. Preliminary selling price (Divide the total recipe cost by the desired food cost percentage.)
U. Adjusted/actual selling price (based on what the customer is willing to pay)
V. Adjusted/actual food cost percentage (Divide the total recipe cost by the adjusted/actual selling price.)
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009

7. Recipe Costing Software
Programs offer the following advantages:
The amount of time they save
Increased accuracy
The detailed reports that they are able to generate
Packages all for the following uses:
The generation of a list of inventory ingredients and their cost
A summary of ingredient quantities
A file storage system of the method of preparation of recipes
A calculation of recipe costs and food costs percentages
The ability to convert recipes to increase or decrease the yield
Fundamentals of Menu Planning 3rd edition. (McVety, Ware and Ware) John Wiley & Sons, Inc. © 2009