ANFP Practice Standards: Calculating Food Costs

Last Updated September 2010

Knowing accurate costs and evaluating cost per patient meal or patient day will help the CDM address budgetary concerns quickly, and help prevent an adverse budgetary outcome at the end of the month. To accurately estimate costs, one must determine the cost per meal, or more often, a ‘meal equivalent.’ A simple method of doing that is dividing total food cost by the number of patient meals including calculated meal equivalents. The standard that follows will help you accurately determine your total meals/meal equivalents and total food costs.

Standard

The certified dietary manager (CDM) assures that raw food costs are calculated per patient day and stays within the department budget.

Criteria

1.1 Raw food costs are determined using one of the following
methods:

Inventory Method: This is the most accurate method of determining monthly raw food costs. It is done by accurately counting the inventory in all storage areas and determining the dollar value of the inventory. The formula for determining raw food costs using this method is:

Many foodservice departments keep storeroom cost records on their computer, to aid in easily updating prices on storeroom inventory costs.

Requisition Method: For facilities that use storeroom requisitions, this method involves adding total direct purchases to the total value of the daily storeroom
requisitions.

Recipe Method: This method is based on determining the total cost of food for each standardized recipe. The cost of each ingredient is added together and divided by the number of servings. Recipes must be used exactly as written (ingredients measured and correct portion sizes). Most facilities need computer software to assist in this method.

Record of Purchases Method: This method uses a simple tabulation of the current month purchase invoices to give the total cost of purchases for a specified time period. This represents an estimate of costs and does not take into account the cost of food in storage.

1.2 Calculate total meals or trays delivered to patients/residents, and Meals on Wheels or Home Delivered Meals trays per day, counting all three meals in a day.

1.3 Calculate ‘meal equivalents’ by adding together the following total food costs:
Cafeteria, floor stock, catering to outside groups, staff meals, tube feedings, and nourishments. Divide this total by a ‘market-basket’ price (average price for a typical cafeteria meal). This will yield the total ‘meal equivalents.’

1.4 Add together total meals (1.2) and meal equivalents (1.3) to get total meals/equivalents.

1.5 Divide total food cost (1.1) by the meals/equivalents (1.4) to determine food cost per patient day.

1.6 Divide food cost per patient day (1.5) by 3 (three meals per day) to get food cost per patient meal.

1.7 Dietary managers have access to their department budget.

1.8 Dietary managers compare their monthly food costs to their monthly budget and make adjustments accordingly.

1.9 Dietary managers forecast for an upcoming budget year using past numbers, the Consumer Price Index, or other projected figures.

1.10 Dietary managers have input into the projected upcoming year’s food cost and budget.

Assessment

1.1 The CDM prepares a written summary of the monthly budget.

1.2 The CDM follows up on increases in monthly food costs by checking variances in the following procedures:

a. Ordering practices
b. Receiving practices
c. Storage practices
d. Production practices (includes portion control, menu substitutions, following standardized recipes)
e. Increases in food prices
f. Waste
g. Unexpected special events

1.3 The CDM designates an employee trained in these procedures to act in their absence.

Summing it Up

These guidelines offer help for CDM, CFPPs responsible for calculating food costs in the nutrition services department. Refer to them as needed.

By Susan Davis Allen, MS, RD, CHE
Susan Davis Allen, MS, RD, CHE is Director of Institutional Advancement at Southwest Wisconsin Technical College in Fennimore, WI. She serves as an advisor to the Certifying Board for Dietary Managers and has authored many publications for ANFP and other professional groups.

References

1. Allen, SD. 'Measuring Meal Production and Calculating Meal Equivalents.' Dietary Manager Magazine, Jan. 2010. p 25.

2. CD-HCF/DMA 'Survival Skills for Nutrition Services.' 2006 p. 92-94.

3. Palacio, J., Thies, M., Introduction to Foodservice, eleventh edition. Pearson Prentice Hall, 2009.