Which method is described for determining the menu selling price by including expenses and profits and dividing by portions?

Which method is described for determining the menu selling price by including expenses and profits and dividing by portions?

• A. Add expenses and profits (except for food) and multiply by 100
• B. Subtract from 100 then take menu standard portion / total = menu selling price
• C. Add expenses and profits (except for food) subtract from 100 then divide menu standard portion by total
• D. Menu price equals cost plus fixed markup

Answer: (C)

Pricing this way starts by treating nonfood costs and the desired profit as a percentage of the selling price. You determine how much of the selling price must cover those expenses, then use the remaining portion to cover the actual food cost. Step through it this way: add up all nonfood costs and the target profit as a percentage of the selling price. Subtract that total from 100 to find the portion of the selling price that will cover the food cost. Then divide the standard portion cost by that remaining percentage (expressed as a decimal). For example, if the standard portion cost is $4.50 and nonfood costs plus desired profit are targeted at 40% of the selling price, the leftover percentage is 60% (0.60). The selling price would be $4.50 ÷ 0.60 = $7.50. This ensures the price covers the food cost plus a proportional share of overhead and profit. Other methods that simply add a flat markup or mishandle the percentage can fail to cover all expenses or over/under-price, because they don’t solve for the selling price in a way that allocates the correct portion to food cost versus overhead and profit.

Pricing this way starts by treating nonfood costs and the desired profit as a percentage of the selling price. You determine how much of the selling price must cover those expenses, then use the remaining portion to cover the actual food cost.

Step through it this way: add up all nonfood costs and the target profit as a percentage of the selling price. Subtract that total from 100 to find the portion of the selling price that will cover the food cost. Then divide the standard portion cost by that remaining percentage (expressed as a decimal).

For example, if the standard portion cost is $4.50 and nonfood costs plus desired profit are targeted at 40% of the selling price, the leftover percentage is 60% (0.60). The selling price would be $4.50 ÷ 0.60 = $7.50. This ensures the price covers the food cost plus a proportional share of overhead and profit.

Other methods that simply add a flat markup or mishandle the percentage can fail to cover all expenses or over/under-price, because they don’t solve for the selling price in a way that allocates the correct portion to food cost versus overhead and profit.