What is the formula for food cost percentage and how should it be monitored weekly?

• A. Food cost percentage = cost of goods sold for food / food sales × 100; monitor weekly by comparing actual vs theoretical cost, compute variance, and take corrective actions.
• B. Food cost percentage = total food cost / total revenue × 100; monitor monthly only.
• C. Food cost percentage = gross profit / food sales × 100; monitor daily.
• D. Food cost percentage = cost of inputs / selling price × 100; monitor quarterly.

Answer: (A)

The main idea here is to measure what portion of food revenue is spent on the actual food ingredients used. The correct approach is to take the cost of goods sold for food (the cost of the ingredients used to prepare the food) and divide it by the food sales, then multiply by 100 to express it as a percentage. This aligns with how restaurants track how efficiently they turn food into revenue.

Monitoring this weekly means comparing the actual food cost for the week to the theoretical (budgeted or standard) cost for that same week. By calculating the variance between actual and theoretical costs, you can see whether you’re overspending or saving. If actual is higher than expected, investigate waste, spoilage, theft, portion creep, price increases, or purchasing inefficiencies and take corrective actions such as tightening portion control, negotiating with suppliers, adjusting the menu or yield, or improving storage practices. If actual is lower, it highlights opportunities to reinforce effective controls and perhaps adjust forecasts.

Other formulas either mix in revenue beyond just food sales, use gross profit as a numerator, or rely on cost inputs divided by selling price, which don’t give a precise measure of the proportion of food sales that goes to food costs and don’t support timely weekly variance analysis.