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

To calculate the total food cost, we use the following formula: \( \text{Total Food Cost} = \text{Opening Stock} + \text{Fresh Purchases} - \text{Closing Stock} + \text{Food Consumed by Staff} + \text{Food Served to Guests (Complimentary)} \) Substituting the given values: \[ \text{Total Food Cost} = 2,500 + 15,000 - 1,500 + 800 + 500 \] \[ \text{Total Food Cost} = 17,300 \, \text{₹} \] Now, we calculate the percentage of food cost to net sales using the formula: \[ \text{Percentage of Food Cost to Net Sales} = \left( \frac{\text{Total Food Cost}}{\text{Total Sales}} \right) \times 100 \] Substitute the values: \[ \text{Percentage} = \left( \frac{17,300}{70,000} \right) \times 100 = 24.71% \] Thus, the total food cost is ₹17,300 and the percentage of food cost to net sales is 24.71%.