Last year an operation achieved a 35 percent food cost on sales of $800,000. For this year, the operation's manager anticipates a 5 percent increase in the prices the operation will pay for food. What should the manager estimate next year's food cost percentage to be if the operation does not raise its menu prices?

Question

Quizplus · Accepted Answer

The food cost for last year was 35% of $800,000, which equals $280,000. With a 5% increase in food prices, the new food cost would be $280,000 * 1.05 = $294,000. Without raising menu prices, sales remain at $800,000. Therefore, the new food cost percentage is $294,000 / $800,000 = 36.75%.

Last Year an Operation Achieved a 35 Percent Food Cost