Question

Calculate the total material (food) cost and its percentage to net sales from the following information:

Hint:

Tracking food costs accurately is essential for managing expenses and ensuring profitability in the food service industry. Maintaining low food costs relative to sales helps increase profit margins.

Answer 1

The total food cost is determined by the formula: \(\text{Total Food Cost} = \text{Opening Stock} + \text{Fresh Purchases} - \text{Closing Stock} + \text{Food Consumed by Staff} + \text{Food Served to Guests (Complimentary)}\). Applying the given values, we get: \[\text{Total Food Cost} = 2,500 + 15,000 - 1,500 + 800 + 500\] which results in \[\text{Total Food Cost} = 17,300 \, \text{₹}\]. To determine the percentage of food cost to net sales, the formula is: \[\text{Percentage of Food Cost to Net Sales} = \left( \frac{\text{Total Food Cost}}{\text{Total Sales}} \right) \times 100\]. Substituting the calculated total food cost and total sales: \[\text{Percentage} = \left( \frac{17,300}{70,000} \right) \times 100 = 24.71%\]. Therefore, the total food cost amounts to ₹17,300, representing 24.71% of net sales.