Chapter 9

MENU PRICING
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
I FOOD COSTING
For costing, or comparative shopping, it is necessary to calculate the
cost of a single unit, as well as a single portion as served.
Unit Cost
The cost of one item when a large quantity (case, sack, box, etc.) is purchased is
known 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)
Example 1: The price of a case of oranges containing 150
oranges 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
= $0.20
150
Portion cost as purchased
Each purchased unit could be divided into smaller portions equivalent
to one serving.
PC
UC PS
Portion Cost = Unit Cost x Portion Size
PC = UC x PS
A calculation of a portion cost often requires units conversion.
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 g
1000 g/kg
=
$1.93
(rounded up to
the nearest cent
PC
UC PS
PC = UC x PS
Example 3: (imperial units) Medium ground beef costs $2.99
per 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 oz
16 oz /lb
=
$0.75
(rounded up to
the nearest cent
PC
UC PS
PC = UC x PS
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
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
II. Menu price
One of the most important decisions in the food business is the decision
on 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 cost
of 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.
In order to coordinate the food cost and selling price, the food cost is expressed as
a percentage of selling price.
$FC
$MP
(SP)
%FC
%FC =
$FC
$MP
Example 4: Sandwich ingredients cost $0.78. Calculate the
selling 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)
Example 5: After some marketing research, a bar owner wanted to price a
chicken 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
Ill. Markup
In the food business the menu price must cover:
Food cost
Labor cost
Expenses
Some profit
Markup is the difference between the menu price and the food cost that
is 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
Markup could also be expressed as a percentage of the menu price, in which case
it is referred to as %markup.
$MU(100)
%MU $MP
%MU =
$MU(100)
$MP
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
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%
Example 5: The menu price is $8.20, and the %markup is
68%. Determine the markup in dollars?
Solution
$MU = $MP x %MU
$MU
%MU $MP
$Mark Up = $Menu Price x %Mark Up
%MU $MU $MP
68% $8.20
Given:
= $8.20 x .68
= $5.58