Module 9 - Actual Vs. Standard Food Costs

Standard cost is the agreed-upon cost of services against which to compare costs.

A standard portion cost is the amount that a standard portion should cost, given the standards and standard procedure for its production.

Management should use actual sales records to determine what the standard food cost percentage should have been.

The Menu Pre-Cost and Abstract is divided in two parts. The section on the right (the forecast section) is based on sales forecast and the section on the left (the abstract) is based on the historic sales.

The abstract portion of the menu pre-cost and abstract form is prepared before sales have taken place.

The actual cost percentage for a given day is the ratio of actual costs of sales to total sales for a given day.

Typically, if the actual costs today and the to date are greater than the standard cost today and to date, the difference should be considered waste or other excessive costs.

Potential savings are only recorded as dollars.

The difference between the actual costs and the standard costs is called variance.

If the actual cost was $17,324 and the standard cost was $16,978, then the potential savings would be $446.

A large favorable variance between actual costs and standard costs is never worth investigating.

Managers need to regularly compare actual costs with standard cost, determining the causes of any excess cost over standard cost and taking appropriate corrective action.

If sales for a test period at the Local were $32,282, the actual cost was $8,356 and the standard cost was $8,587, what would the potential savings be?

The sales in the Local coffee shop for a test period of 30 days were $28,840, the actual cost was $6,958.25, and the standard cost was $6,616.37. What are the potential savings as a percentage of sales?