Documentation/ Master records and catalogues/ Cost, margin and food cost
Cost per portion, margin and food cost
A finished costing gives back four figures: total cost, cost per portion, margin and food cost. All four come out of the same calculation, but they answer different questions, and the one most used for setting prices is the last.
Management › Recipe Costing (AI) › recipe › the Totals block
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The four figures
| Measure | What it answers | What it depends on |
|---|---|---|
| Total cost | What the whole preparation costs to produce. | The ingredients and their wastage. |
| Cost per portion | What each serving costs. | The total cost and the number of portions. |
| Margin | What is left per portion, in money. | The selling price and the cost per portion. |
| Food cost | What proportion of the price goes on ingredients. | The cost and the selling price. |
Alongside them is the last update: the date of the most recent recalculation. It is what tells you whether the figures are current or months old.
Total cost
The sum of every line's cost, each with its wastage already applied. It includes the cost of any sub-recipes that go in as ingredients.
It is ingredients, not full cost: it takes in no labour, energy, depreciation or overheads. If you want to bring any of those in, the way is a manual line with the amount on it.
Cost per portion
The total cost divided by the portions declared on the recipe. With no portions there is no cost per portion, and with no cost per portion there is no margin and no food cost.
It is the field most often forgotten when a recipe is created. A recipe with no portions works its total cost out correctly and leaves the other three measures blank.
The number of portions should be the real service figure, not the theoretical one. If a two-litre preparation is served in 150-millilitre portions, that is thirteen portions, not ten.
Margin
The difference between a portion's selling price and its cost, in money. It is the figure that says how much you make per dish served.
Its use is different from the food cost's: margin says how much comes in; food cost says whether the proportion is healthy. A dish with a high margin and a high food cost sells well but stands a price rise badly; one with a low margin and a low food cost needs volume.
Food cost
The ratio between a portion's cost and its selling price, as a percentage. A food cost of 30 % means that of every ten euros taken, three go on ingredients.
It is the industry's standard measure because it lets you compare dishes with each other regardless of price: an €8 starter and a €24 main are compared on their percentage, not on their money.
How to read a food cost
| Rough range | What it says |
|---|---|
| Below 20 % | Very profitable. Worth checking the cost is complete and no lines are missing. |
| Between 25 % and 35 % | The usual range in hospitality. |
| Above 40 % | A tight margin. Look at the selling price, the portion size or the supplier. |
| Above 50 % | The dish loses money as soon as any other cost is added. |
These are general industry reference points, not the application's judgement. Every business has its own threshold: a high-volume place with little service bears higher food costs than one with a lot of labour in it.
What is genuinely useful is not the absolute value but the comparison between dishes on the same menu and how the same dish moves over time. A food cost that climbs three points in two months points to a price rise that has not been passed on.
The list's summary
The costings screen shows three overall figures at the top: the number of recipes, the average cost and the average food cost.
The average food cost is a quick thermometer for the menu. Its limitation is that it is not weighted by sales: a dish sold twice a month counts as much as the best seller. It is for spotting drift, not for working the business's result out.
When the figure cannot be trusted
Four situations in which the food cost misleads:
- There are lines with no cost resolved. The cost comes out below the real figure and the food cost looks artificially good.
- The wastage is missing. Same effect, and usually the biggest of the four.
- The calculation is old. The last update date says so: the prices are those of the moment it was recalculated.
- A raw material's cost is an average over inconsistent units. The screen itself warns you of that as you choose the cost.
Things that come up
| What you see | Why | What to do |
|---|---|---|
| The cost per portion comes out blank | The recipe has no portions declared. | Fill the number of portions in on the recipe. |
| The margin and food cost come out blank | The selling price is missing. | Give it on the recipe and recalculate. |
| The figures do not change after editing the recipe | The recalculation has not been set off. | Use Save and update costs. |
| The food cost is suspiciously low | There are lines with no cost resolved or no wastage. | Go over it line by line before taking pricing decisions. |
| Two similar dishes give very different costs | One uses a particular product and the other a raw material average. | Make the approach consistent: pick a particular product on both. |