What you need
The dish's recipe with the quantities per portion, and the cost of each ingredient in the same unit: per kilo, per litre or per piece. If you buy meat by the kilo and the recipe uses 200 grams, that part costs 0.200 kg times the price per kilo.
Include everything that leaves the kitchen with the dish: the side, the frying oil and the breadcrumbs. What you don't count doesn't disappear: it ends up as a stock difference.
Example: breaded cutlet with fries
With these costs, one portion costs $3.01. If you sell it for $12.00 before tax, the cost is 25.1% of the price and you keep $8.99 to pay wages, rent and the other expenses.
| Ingredient | Quantity | Unit cost | Cost |
|---|---|---|---|
| Beef | 0.200 kg | $11.00 / kg | $2.20 |
| Breadcrumbs and egg | 1 portion | $0.30 | $0.30 |
| Potatoes | 0.300 kg | $1.20 / kg | $0.36 |
| Oil | 0.050 l | $3.00 / l | $0.15 |
| Cost of the dish | $3.01 |
Which cost to use when prices change
If you bought 10 kg of beef at $10.00 a kilo and then another 10 kg at $12.00, the beef in your fridge costs $11.00 a kilo on average. That is the weighted average cost: the total you paid divided by the kilos you bought.
Using the latest price raises the cost too early, and using the first one leaves it out of date. The weighted average follows what you really paid for what you have.
How often to recalculate it
Every time the price of an important ingredient changes. With a long menu, doing it by hand is what makes costs go stale, which is why it pays to have it update by itself with every purchase.