Restaurant Business : How to Calculate Your Cost of Goods Sold?

What is Cost of Goods Sold?

Have you ever wondered what the actual calculation is for cost of goods sold for your restaurant maybe one of the most important calculations you're ever going to do in your business.

knowing your cost of goods sold could be one of the most important things you're going to measure in your business and to measure it you have to have the right equation and the right information so how do we do this.
 

Restaurant Cost of Goods Sold

Beginning Inventory

well it starts off with knowing your beginning inventory beginning inventory is what was on the shelves the last time you counted well that means we have to be taking inventory minimum on monthly basis preferably on a weekly basis to know the value of everything on the shows that includes all of our batch.
 
items meaning desserts side dishes soups anything that I manufacture myself for instance if I have a tenderloin I cut it up into fillets that isn't in transit and gone that would make my food cost higher I need to have a value for each one of those fillets that I can count it so I have a beginning inventory of all the products that I have on there by the way paper supplies aren't a part of it janitorial is not a part of it small wares not a part of it only the food or only the liquor bottle beer draught beer wine we're gonna do cost goods sold by category in this case for cost of goods sold.

let's just say food all the food that was on the shelves last period well I'm gonna add to that all of my purchases anytime a vendor comes in and drops off any product whether paid for or not it is an expense that period we're on something kind of cruel accounting system ernõ use means when the sale comes in whether I collect the money it's a sale based on the IRS rules.

whether I pay for a product that I bring in doesn't matter it's an expense and then use it's an adjustment in inventory if I use more than I purchased I take it from inventory increase my cost of goods sold if I didn't order so I ordered too much and I take it I have expense put it on the shelf it reduces my cost of goods sold so Erno use beginning inventory plus purchases whether paid for or not gives me a total how much money.

I have all my shows that it could sell that also means that if I had say I had $5,000 on the shelves when I opened my restaurant brought a delivery in of $10,000 close the restaurant didn't open till the last day of the period called the 31st well I'd have $15,000 I could sell beginning inventory plus purchases gives me total available then at the end of the period by the end of that Sunday or last day of the month again I'd rather it be a Sunday we count what's on the shelves for full value beginning inventory plus purchases total available minus ending inventory gives me use that is my cost of goods sold.

how do we use product number one we hope we sell it but it could be stolen wasted spoiled and it could be you've decided to take it home with you meaning as an owner you took tax advantage of your business.

how to barbecue this weekend took some ribs and burgers some Jack Daniels a keg of beer well that's gonna drive your managers cost good sold up I'm not telling you not to do that but make sure it goes on a waste sheet that when you tell them their food cost is high they say no no I'm in line you took some product but see the equation beginning inventory plus purchases minus end gives me use use is blind it has no idea.

where it went so we need other systems now we take our total product use divided by the sales for that same period we come up with our food cost pork cost percentage our cost of goods sold percentage so if I come up with a 30 percent food cost that means for every dollar and food sales that came in I use 30 cents and product to bring that dollar in that's your cost of goods sold.


it's an incredibly vital part of your business a piece of information you must know to Restaurant Accounting control your bottom line.

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