Pricing & margin
Theoretical Food Cost
Formula reviewed by Tahir Asif, CMA
What the food used should have cost, based on the recipe cost of every item sold, before waste, over-portioning or loss.
Theoretical food cost multiplies the units sold of each menu item by its recipe cost and adds them up. It assumes every plate followed the recipe exactly and nothing was wasted, so it is the best case for the menu that was sold.
Actual food cost minus theoretical food cost is the food cost variance. It can be stated in dollars, in percentage points of sales, or relative to the theoretical cost, and sources use different conventions, so it is worth stating which one is meant.
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