chapter 8 menu pricing

8/12/2019 Chapter 8 Menu Pricing

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Chapter 9

MENU PRICING


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Primary Formula

APC = UC x APQ

APC

UC APQ

As Purchased Cost = Unit Cost x As Purchased Quantity

PC

UC PS

Portion Cost = Unit Cost x Portion Size

PC = UC x PS


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I FOOD COSTING

For costing, or comparative shopping, it is necessary to calculate thecost of a single unit, as well as a single portion as served.


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Unit Cost

The cost of one item when a large quantity (case, sack, box, etc.) is purchased isknown as unit cost. It is calculated by dividing the total cost by the quantity

purchased.

Unit Cost =As Purchased Cost

As Purchased Quantity(# of units)


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Example 1: The price of a case of oranges containing 150oranges was $30. Calculate the unit cost per orange.

Solution:

APC UC APQ

(# of units)

$30.00 150

Given:

UC =APC

APQ

(# of units)

UC =30

= $0.20150
http://www.tdmillsgbc.com/chapters/chapter09/UnitCost.xls


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Portion cost as purchased

Each purchased unit could be divided into smaller portions equivalentto one serving.

PC

UC PS

Portion Cost = Unit Cost x Portion Size

PC = UC x PS


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A calculation of a portion cost often requires units conversion.


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Example 2: (metric units) Top Sirloin Roasts cost $11 per kg.What is the cost of a 175 g portion?

Solution: Convert the price from dollars per kg to dollars per g, and multiply

by the size of a portion in grams. Use a conversion factor of 1000 g/kg.

APC

per Gram

PS

in grams

PC UC PS

$11.00 /kg 175 g

Given:

= $11.00 /kg x 175 g1000 g/kg

= $1.93(rounded up to

the nearest cent

PC

UC PS

PC = UC x PS


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Example 3: (imperial units) Medium ground beef costs $2.99per lb. Calculate the cost of a 4 oz portion.

Solution: Convert the the cost from dollars per lb to dollars per oz and

multiply by the size of a portion in ounces.

APC

per oz

PS

in grams

PC UC PS

$2.99 /lb 4 oz

Given:

= $2.99 /lb x 4 oz16 oz /lb

= $0.75(rounded up to

the nearest cent

PC

UC PS

PC = UC x PS
http://www.tdmillsgbc.com/chapters/chapter09/FoodCosting.xls


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II. Menu price Primary Formula

$FC = $MP x %FC

$MU(100) = $MP x %MU

$FC

$MP(SP) %FC

$Food Cost = Menu Price x %Food Cost

$MU(100)

%MU$MP

$Mark Up(100) = %Mark Up x $Menu Price


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II. Menu price Primary Formula

$MU = $MP - $FC

$MU = $MP x %MU

$MARKUP = $MENU PRICE - $FOOD COST

Markup could also be expressed as a

percentage of the menu price, in

which case it is referred to as

%Markup

Menu Price is the same as Selling Price

$MU

%MU$MP

$Mark Up = $Menu Price x %Mark Up


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II. Menu price

One of the most important decisions in the food business is the decisionon a menu price. Overpricing menu items might result in the loss of

patrons to competition; on the other hand, a menu priced too low

could leave the business without a profit.

The strategy of every business is to keep costs low. After figuring

%yield and price factor, one can have a clear idea of what the costof ingredients per menu item is. To cover the cost of labor and other

expenses (hydro, water, etc.), the menu price (selling price) must be

higher than the cost of ingredients.


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In order to coordinate the food cost and selling price, the food cost is expressed asa percentage of selling price.

$FC

$MP(SP) %FC

%FC =$FC

$MP


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Example 4: Sandwich ingredients cost $0.78. Calculate theselling price, if the desired %Food cost is 28%.

Solution: Find the Menu price from the Menu Price Primary Formula:

$FC %FC $MP

$0.78 28%

Given:

$FC

$MP(SP)

%FC

$MP =$FC

%FC

$MP =$0.78

.28

= 2.7857

= $2.79

(rounded up to the nearest cent)
http://www.tdmillsgbc.com/chapters/chapter09/MenuPrice.xls


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Example 5: After some marketing research, a bar owner wanted to price achicken dinner the same as the competition, at $9.95. What should be the$Food cost, if a 30% food cost level is desired?

Solution: The $Food cost can also be found from the Menu Price Primary

Formula :

$FC %FC $MP

30% $9.95

Given:

$FC

$MP(SP) %FC

$FC = $MP x %FC

= $9.95 x .30

= $2.99
http://www.tdmillsgbc.com/chapters/chapter09/FoodCost.xls


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Ill. Markup

In the food business the menu price must cover:

Food cost

Labor cost

Expenses

Some profit


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Markup is the difference between the menu price and the food cost thatis used to cover labor cost, expenses, and generate some profit. The

dollar amount of markup (the dollar markup) is calculated as:

$Markup = $Menu price - $Food cost


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Markup could also be expressed as a percentage of the menu price, in which caseit is referred to as %markup.

$MU(100)

%MU$MP

%MU =$MU(100)

$MP


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Example 3: The menu price is $8.20, and the food cost is$2.46. Determine the markup in dollars?

Solution: From the formula :

$MU = $MP - $FC

$FC $MU $MP

$2.46 $8.20

Given:

$MU = $8.20 - $2.46= $5.74


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Example 4: The menu price is $8.20, and the markup is$5.74. What is the %markup?

Solution:

%MU $MU $MP

$5.74 $8.20

Given:

$MU(100)

%MU$MP

%MU = $MU(100)$MP

%MU =$5.74

x 100$8.20

= 70%
http://www.tdmillsgbc.com/chapters/chapter09/percentmarkup.xls/


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Example 5: The menu price is $8.20, and the %markup is68%. Determine the markup in dollars?

Solution

$MU = $MP x %MU

$MU

%MU$MP

Mark Up = Menu Price x %Mark Up

%MU $MU $MP68% $8.20

Given:

= $8.20 x .68

= $5.58
http://www.tdmillsgbc.com/chapters/chapter09/DollarMarkup.xls

chapter 8 menu pricing

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