Calculating Food Costs

Updated: January 2019

Overview: The certified dietary manager (CDM) is the financial and budgeting expert in the foodservice department to help their facility’s bottom line. After labor costs, food cost will use up much of the budget. Fitting food costs into your budget is a vital skill for the CDM.

Supplemental Material: Access the Gap Analysis Tool to supplement your practices.

Download

Standard 1

The CDM calculates food costs in order to make decisions and meet budgeting goals.

Criteria

Implement & Evaluate

1.1 The CDM calculates their department’s Monthly Food Cost.

Example:

Beginning Inventory
PLUS Purchases
MINUS Ending Inventory

$21,745.00
+ $7,976.00
- $17,365.00

$12,356.00

1.2 The CDM calculates their department’s Food Cost as a Percentage of Sales.

Food Cost as a Percentage of Sales
Monthly Food Cost DIVIDED by Sales

Example

Monthly Food Cost
DIVIDED by Sales

$12,356.00
÷ $36,421.00

33.9% (.339)

1.3 The CDM in Healthcare calculates their Raw Food Cost Per Patient Day (PPD).

Per Patient Day (PPD)
Monthly Food Cost DIVIDED by Total Patient Days

(Total Patient Days=the number of patients MULTIPLIED by # of days in the month)

Example

Monthly Food Cost
DIVIDED by Total Patient Days*

$12,356.00
÷ 2,850

$4.33 PPD

ANFP Benchmarking 2016 Data shows $5.35-$7.41 Food Cost Per Patient Day for Skilled Nursing Facilities

*Total Patient Days = 95 patients x 30 days

1.4 The CDM in Healthcare calculates their Total Cost Per Patient Day.

Total Cost Per Patient Day (including labor)
1. Monthly Food Cost
2. PLUS Labor Costs*
3. DIVIDED by Total Patient Days

Monthly Food Cost
PLUS Labor Costs*
DIVIDED by Total Patient Days
= TOTAL COST Per Patient Day

$12,356.00
+ $15,600.00

$27,956.00
÷ 2,850

$9.81

*In this example, Labor Costs include:
Wages:

5 cooks x 40 hours/wk @ $15.00/hour

Benefits: $12,000 x 30%

=$3,000/week
= $12,000/month

$3,600/month

TOTAL LABOR COSTS = $15,600.00

As a CDM, you will estimate personnel/labor costs (use HR as needed). Factors to consider:

Should you calculate in benefits?
Should you calculate in all employees such as waitstaff, sanitation, etc.?
Should you just calculate those preparing the meals?
You may also want to consider utilities or other costs that are worked into your department’s costs or budget.

The key is to choose a method to count Labor Costs and be consistent with it to compare from month to month.

1.5 The CDM calculates their Raw Food Cost per Meal.

Raw Food Cost per Meal
Monthly Food Cost DIVIDED by Total Meals Served (using whatever you define as a meal served)

Example

Monthly Food Cost
DIVIDED by Total Meals Served*

$12,356.00
÷ 8,550

$1.45

*in this example, total meals served was 8,550. 95 clients x3 meals per day x30 days=8,550

References:

Legvold, Dee, and Salisbury, Kristi. Foodservice Management by Design. Association of Nutrition & Foodservice Professionals, 2^nd Edition, 2018.

Kristin Klinefelter, MS, RDN, LD has been in the dietetics field for 20 years, working in a variety of consulting and education capacities. She has been working with the University of North Dakota's Nutrition and Foodservice Training Program for ten years and served on the Certifying Board for Dietary Managers (CBDM) for six years.

Click below to download a printable flyer with the information on this page.

Printable PDF Flyer

Woman viewing laptop

Calculating Food Costs