By Deagon B. Williams
First of all, no they are not the same thing. Close, but not interchangeable. Food cost percentage is the percent of sales you spent on food to make the dish you sell. Period. End of story.
Depending on how you define Cost of Goods Sold (COGS), you can actually use COGS to find your Food Cost Percentage. So one of them kind of helps you get to the other.
Let’s look at the formula for food cost percentage for a minute:
FOOD COST PERCENTAGE FORMULA: food cost/ gross sales x 100 = food cost %
Notice how you divide food cost by gross sales to get the percentage? Most people figure that food cost by taking an inventory of the food they have on hand and looking at what food they purchased. That might sound really familiar when you see the formula for COGS:
COST OF GOODS SOLD FORMULA: beginning inventory
– ending inventory
The above formula for COGS is a very basic, stripped down definition of Cost of Goods Sold- the value of the raw materials used to produce the goods you sell. It doesn’t include direct labor or overhead. If you use this version of COGS, you can basically plug it in to the formula for food cost percentage, like this:
COGS/ gross sales x 100 = food cost percentage
Remember, if you want to include direct labor and overhead in your COGS, then you can’t use it to help you find Food Cost Percentage.
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