In the Texas Restaurant Association Markup Method, how is the menu selling price determined?

In the Texas Restaurant Association Markup Method, how is the menu selling price determined?

• A. Subtract a fixed amount from cost
• B. Divide the standard price portion cost by the divisor
• C. Multiply cost by markup factor
• D. Use competitor price

Answer: (B)

Dividing the standard portion cost by a predetermined divisor is used to set menu prices so the selling price aligns with a target food-cost percentage. The divisor represents the desired portion of sales that will cover food costs (and related expenses). For example, if you’re aiming for 30% food cost, you divide the cost of the portion by 0.30. So a standard portion cost of $3.50 would yield a menu price of about $11.67 ($3.50 ÷ 0.30). This method ties price directly to cost and the target profit margin. Other options don’t fit because they don’t base the price on achieving a specific food-cost percentage: subtracting a fixed amount from cost ignores the needed margin; multiplying by a markup factor is a different pricing approach; and using a competitor’s price relies on market pricing rather than cost-based targets.

Dividing the standard portion cost by a predetermined divisor is used to set menu prices so the selling price aligns with a target food-cost percentage. The divisor represents the desired portion of sales that will cover food costs (and related expenses). For example, if you’re aiming for 30% food cost, you divide the cost of the portion by 0.30. So a standard portion cost of $3.50 would yield a menu price of about $11.67 ($3.50 ÷ 0.30). This method ties price directly to cost and the target profit margin.

Other options don’t fit because they don’t base the price on achieving a specific food-cost percentage: subtracting a fixed amount from cost ignores the needed margin; multiplying by a markup factor is a different pricing approach; and using a competitor’s price relies on market pricing rather than cost-based targets.