Which formula expresses the food cost percentage?

Which formula expresses the food cost percentage?

• A. Food / Sales = Food Cost Percentage
• B. Sales / Food = Food Cost Percentage
• C. Food Cost Percentage x Sales
• D. Net profit margin

Answer: (A)

Understanding how much of every dollar in sales goes to food costs is the key idea. The food cost percentage is found by dividing the actual cost of the food used (food cost) by the total sales (revenue from selling the food). In other words, Food cost divided by Sales equals the Food Cost Percentage. For example, if food cost is $5,000 and sales are $20,000, the food cost percentage is 5,000 / 20,000 = 0.25, or 25%. This metric helps you compare actual performance to budgets and industry benchmarks, and it’s influenced by portion sizes, waste, and supplier prices. The other options don’t express the intended relationship: Sales divided by Food would be the inverse and not a typical cost percentage; multiplying a percentage by Sales would yield a dollar amount, not a percentage; and Net profit margin measures profitability after all expenses, not just food cost.

Understanding how much of every dollar in sales goes to food costs is the key idea. The food cost percentage is found by dividing the actual cost of the food used (food cost) by the total sales (revenue from selling the food). In other words, Food cost divided by Sales equals the Food Cost Percentage.

For example, if food cost is $5,000 and sales are $20,000, the food cost percentage is 5,000 / 20,000 = 0.25, or 25%. This metric helps you compare actual performance to budgets and industry benchmarks, and it’s influenced by portion sizes, waste, and supplier prices.

The other options don’t express the intended relationship: Sales divided by Food would be the inverse and not a typical cost percentage; multiplying a percentage by Sales would yield a dollar amount, not a percentage; and Net profit margin measures profitability after all expenses, not just food cost.