![]() ![]() Secondly, calculate the total value of all the inventory purchased within this period. Some major figures are important for calculating the COGS for a given period.įirstly, find the total value of your inventory at the start of the period. Calculating Cost of Goods for a Restaurant If your answers are yes, then you can include the cost as part of your COGS and vice versa. Will an increase or decrease in sales affect this expense? Will I still incur this cost if I don’t produce or sell anything today? Indirect Cost - What are the Key Difference? Two basic tests that will help you determine whether or not an expense qualifies as COGS are: This is because they are not directly affected by daily production and sales. Indirect expenses such as rent and electricity bills do not count as COGS. Such costs for a restaurant can be the purchase of food and ingredients, cost of cooking gas, cost of packaging materials, etc. The expenses that directly apply to the production and delivery of your products are what make up the COGS. What is Included in COGS for a Restaurant? Your gross income less all these expenses gives you your net profit. For a restaurant, it is the summation of all it costs to make and deliver your food.įrom purchasing raw food materials to all the cooking and post-cooking expenses, you need to know the exact cost of producing a menu item. In simple terms, COGS is the total cost involved in the production and delivery of a product. ![]() Just read on as we consider some basic things you need to know about your Cost of Goods. And when you get your pricing wrong, you’re risking your business profit.ĬOGS is not that hard to track and monitor. What makes COGS even more crucial is that it has a direct effect on your pricing. An accurate record of this detail will help you manage your business more profitably. As a restaurant owner, one of the most important records in your financial statements is the Cost of Goods Sold (COGS). ![]()
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