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Answer:
Monthly Food Costs
Monthly food costs are determined by taking a monthly physical inventory of food stock, evaluating the inventory, and then adjusting the valuation to more accurately reflect the cost of food consumed.
The basic formula to determine the cost of food in a month is:
cost of food = opening inventory + purchases − closing inventory
Example 25: Calculating food cost
For example, if opening inventory is $10 000 and purchases amount to $7500, and the closing inventory (which is also the beginning inventory for the next month) is $9000, then the basic cost of food is:
cost of food = opening inventory + purchases − closing inventory
= $10 000 + $7500 − $9000
= $17 500 − $9000
= $8500
The value of the inventory is the critical component in deriving an accurate cost figure from the basic formula given above.
The information needed to accurately assess the value of inventory is obtained from daily receiving reports (that is, purchases), perpetual inventory cards (that is, inventory records that indicate what is in storage and what supplies have been removed from storage at the request of the kitchen), and by doing a physical inventory.