Why do we have to compute the selling price?
Answers
Explanation:
It is important to note that the selling price is the total amount of money that will be received so this has to represent 100% for the purpose of this calculation. In basic terms, food costs + gross profit = selling price. Learn more about Marked Price here in detail.
To calculate the selling price on this basis, the food costs have to be expressed as a percentage of the selling price using the following calculation. Food cost ÷ Food cost as a % of the selling price × 100
For example, if food costs for a dish come to £4.50 and the gross profit target is 75%, the food cost as a percentage of
the targeted sale is 25%.
To calculate the selling price based on this information:
£4.50/25× 100 = £18.00.
By dividing £4.50 by 25, this brings the figure down to 1% of the selling price (£0.18). By then multiplying by 100, it brings the figure up to 100%, the selling price (£18.00). As long as you have the food cost and the target gross profit percentage, this is sufficient information to calculate the selling price.