Which set of items is used to calculate basic food cost?

Which set of items is used to calculate basic food cost?

• A. Labor costs, utilities, and rent
• B. Marketing costs, insurance
• C. Opening inventory, Purchases, Closing inventory
• D. Salaries, benefits, overhead

Answer: (C)

The main idea here is how to calculate the cost of food actually used during a period by tracking inventory flow. Start with the opening inventory, add all purchases of food, and subtract the ending inventory. Opening inventory plus purchases gives the total food available for use in the period; subtracting the ending inventory removes what is still on hand, leaving the cost of food used to prepare meals. This is the basic food cost: the raw material cost consumed in the period. Other options mix in costs that aren’t part of the raw food cost, such as labor, utilities, rent, marketing, insurance, salaries, benefits, or overhead. Those are operating expenses or overhead and belong in separate cost categories, not the basic food cost.

The main idea here is how to calculate the cost of food actually used during a period by tracking inventory flow. Start with the opening inventory, add all purchases of food, and subtract the ending inventory. Opening inventory plus purchases gives the total food available for use in the period; subtracting the ending inventory removes what is still on hand, leaving the cost of food used to prepare meals. This is the basic food cost: the raw material cost consumed in the period.

Other options mix in costs that aren’t part of the raw food cost, such as labor, utilities, rent, marketing, insurance, salaries, benefits, or overhead. Those are operating expenses or overhead and belong in separate cost categories, not the basic food cost.