THE STANDARD FOOD COST PERCENTAGE• The Standard Food Cost Percentage is an ideal or benchmark figure that allows management to design standardized recipes that allows for the food cost percentage of a given menu item to be no more than 40% of its selling price and a gross profit percentage/contribution margin percentage greater than 60% of its selling price.• From the above analysis, irrespective of a menu’s Sales Mix for a given period, the menu’s Standard C.O.G.S/C.O.S should be always less than 40% of Sales Revenue for the period.

THE STANDARD FOOD COST PERCENTAGE The Standard Food Cost Percentage can be derived from the following the following formula:The Standard COGS (for the period)/ Standard Sales Revenue (in that period) X 100/1 NB: The Standard Food Cost Percentage can be calculated on both a daily and on an accumulated basis. NB: Figures for the Standard COGS/COS as well as for Standard Sales Revenue are derived from the Sales Report for the period.

THE STANDARD FOOD COST PERCENTAGE

• The Standard Food Cost Percentage for the menu is a theoretical food cost percentage since it assumes the following hypothetical conditions:(a)All standardized recipes were followed in the period when producing menu items;(b)The Standard Food Cost Percentage is based upon what the overall food cost percentage should be based upon a forecasted Sales Mix (ie. the Menu Pre Cost)(c)There was no wastage, spoilage and theft of inventories in the period;(d)There was no stealing of cash or incorrect billing during the period;(e)There were no negative effects from suppliers in the period with regards the procurement of inventories or the availability of credit;(f)There were no negative exogenous factors that affected the cost of production (COGS/COS) or sales revenue in the period.

THE ACTUAL FOOD COST PERCENTAGE

• The Actual Food Cost Percentage is a figure that captures the degree of efficiency and effectiveness of operations for a given period.

• The Actual Food Cost Percentage indicates to the manager what actually transpired between the Actual COGS/COS for the period, and its impact upon Actual Sales Revenue in that period.

THE ACTUAL FOOD COST PERCENTAGE• The Actual Food Cost Percentage therefore indicates

a Food Cost Percentage that has taken into account and quantified the following variables:

(a) The actual Sales Mix for the period;(b) Reflects the degree to which standardized recipes were followed in the period;(c) Captures the extent of wastage, spoilage and theft of inventories in the period;(d) The impact of the quality of qualifications, skills and experience of employees in

the period where production is concerned;(e) The extent of problems faced from suppliers that may have impacted the cost of

production (COGS/COS) and/or Sales Revenue in the period;(f) The degree to which stealing of sales revenue and/or incorrect billing took place in

the period;(g) The actual impact of exogenous factors affecting the cost of production

(COGS/COS) and/or Sales Revenue in the period;

THE ACTUAL FOOD COST PERCENTAGE The Actual Food Cost Percentage can be derived from the following the following formula:The Actual COGS (for the period)/ Actual Sales Revenue (in that period) X 100/1 NB: The Actual Food Cost Percentage can be calculated on both a daily and on an accumulated basis. NB: Figures for the Actual COGS/COS as well as for Actual Sales Revenue are derived from a physical count for the period.

THE ACTUAL FOOD COST PERCENTAGE

• Theoretically the Actual Food Cost Percentage should be equal to the Standard Food Cost Percentage for the period. This should be so if there are no negative impacts upon the cost of production (COGS/COS) and/or Sales Revenue in the period.• Realistically, the Actual Food Cost Percentage is seldom ever equal to the Standard Food Cost Percentage since there would always be negative factors that would either increase the cost of production (COGS/COS) and/or lower the generation of Sales Revenue in the period.

THE ACTUAL FOOD COST PERCENTAGE• When the Actual Food Cost Percentage is greater than the Standard Food Cost Percentage by more than 1%, management must immediately review their existing controls over the control of inventory cost and the manner of monitoring sales revenue within the organization.• Control Systems must be (re) devised to monitor: (a)Production Cost viz following standardized recipes;(b)Effective procurement of inventories at the lowest cost possible viz the Supplier Portfolio;(c)The opportunities for wastage, spoilage and theft of inventories;(d)The recording of sales revenue and ensuring proper billing;(e)The recruitment and selection of employees viz qualifications, skills and experiences gained;(f)Changes in exogenous factors in the external environment.