The food cost variance formula is actual food cost minus theoretical food cost. Theoretical is what the food should have cost: what you made (or sold) times each recipe's standard cost. Actual is what it did cost: opening stock plus purchases minus closing stock, at what you paid. Kitchens often quote it in points instead: actual food cost % minus theoretical food cost %, both as a share of sales. The variance splits into two parts, price (you paid more than the standard) and usage (you used more than the recipe), and the split tells you where to look. Below is a week worked through, ingredient by ingredient, and a free calculator.
The short version
- Theoretical food cost = Σ (batches made × recipe cost at standard prices).
- Actual food cost = opening stock + purchases − closing stock, at cost.
- Variance = actual − theoretical. In points: actual food cost % − theoretical food cost %.
- Price variance = actual cost − actual quantity × standard price. That's the invoices.
- Usage variance = (actual quantity − theoretical quantity) × standard price. That's the kitchen.
- Price + usage = the whole variance, so nothing is left unexplained.
- TaroStack costs every batch from the lots it used and shows which recipe line is wrong. More below.
The formulas
| Formula | |
|---|---|
| Theoretical food cost | Σ batches made × each recipe's cost at standard prices |
| Actual food cost | opening stock + purchases − closing stock, valued at what you paid |
| Food cost variance, $ | actual − theoretical |
| Food cost %, either one | food cost ÷ sales |
| Food cost variance, points | actual food cost % − theoretical food cost % |
| Price variance, per ingredient | actual cost − actual quantity × standard price |
| Usage variance, per ingredient | (actual quantity − theoretical quantity) × standard price |
A production kitchen counts theoretical from batches made, which is what this article does. A restaurant counts it from dishes sold, through the menu's recipes. The arithmetic is the same.
A week, worked through
Windward Roots, the made-up taro business I use in these examples, made five batches of kūlolo and six of taro sweet bread one week in late September. Theoretical quantities are the recipes times the batches; actual quantities are opening stock plus deliveries minus the Sunday count; actual cost is what the stock used had cost, oldest first.
| Ingredient | Theoretical | Actual | Standard price | Theoretical cost | Actual cost | Variance | Price | Usage |
|---|---|---|---|---|---|---|---|---|
| Grated taro | 60 kg | 62.4 kg | $2.90 | $174.00 | $206.56 | $32.56 | $25.60 | $6.96 |
| Coconut milk | 80 cans | 81 cans | $2.25 | $180.00 | $186.45 | $6.45 | $4.20 | $2.25 |
| Brown sugar | 20 kg | 20 kg | $2.43 | $48.60 | $48.60 | $0.00 | ||
| Taro paste | 43.2 kg | 45.0 kg | $3.84 | $165.89 | $172.80 | $6.91 | $6.91 | |
| Bread flour | 72 kg | 72.7 kg | $1.10 | $79.20 | $79.97 | $0.77 | $0.77 | |
| Sugar | 11.52 kg | 11.52 kg | $2.00 | $23.04 | $23.04 | $0.00 | ||
| Butter | 8.64 kg | 9.5 kg | $8.82 | $76.20 | $88.19 | $11.99 | $4.40 | $7.59 |
| Instant yeast | 1.152 kg | 1.152 kg | $12.50 | $14.40 | $14.40 | $0.00 | ||
| Total | $761.33 | $820.01 | $58.68 | $34.20 | $24.48 |
The week's food cost was $58.68 over what the recipes said, 7.7%. The week's production sold for $2,484 (240 packs of kūlolo at $6.00 and 144 loaves at $7.25), so theoretical food cost was 30.6% of sales and actual was 33.0%: a variance of 2.4 points.
What the price variance says
$34.20 of the $58.68 is price, and most of that is one thing: taro. The kitchen used up the last 11.2 kg of grated taro at $2.90, then 51.2 kg from a new delivery at $3.40, because it was a short month for taro. The rest is a new case of coconut milk at $2.45 instead of $2.25, and a new case of butter at $9.70 a kilo instead of $8.82.
Nobody in the kitchen did anything wrong to cause a price variance. It's a question for whoever sets prices and buys: whether to raise the wholesale price, find another supplier, or accept a thinner week. What it isn't is a reason to tell the bakers to be more careful.
What the usage variance says
The other $24.48 is usage, and that one is the kitchen's. Each line has a story, and finding it is the point:
| Ingredient | Over by | Cost | What it turned out to be | The fix |
|---|---|---|---|---|
| Butter | 0.86 kg | $7.59 | Greasing the loaf pans; the recipe doesn't list it | Add it to the recipe |
| Grated taro | 2.4 kg | $6.96 | Kūlolo pans filled a little heavy | Weigh one pan per batch |
| Taro paste | 1.8 kg | $6.91 | The new baker spreads the swirl thicker | Weigh the filling, not eyeball it |
| Coconut milk | 1 can | $2.25 | A dented can thrown out and never written down | Log it as waste |
| Bread flour | 0.7 kg | $0.77 | Flour for the bench | Normal; allow for it in the recipe |
Two of these aren't really variances at all. The butter and the bench flour are used every time, and the recipe leaves them out. Put them in the recipe and the theoretical cost tells the truth. The dented can is waste, and waste that's written down with a reason stops being a mystery, which is what a waste log is for. That leaves the heavy pans and the thick swirl: portioning, and the only real fixes are a scale and a habit.
Get the calculator
Download the food cost variance calculator. It has the recipes with the batches made, the variance tab worked out ingredient by ingredient, split into price and usage, and the food cost percentages. Put in your own recipes, batches, counts and costs and it does the rest. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Theoretical qty =SUMPRODUCT(recipe quantities, batches made)
Actual qty =opening + received - closing
Price variance =actual cost - actual qty * standard price
Usage variance =(actual qty - theoretical qty) * standard price
The count behind the actual quantities is in the inventory variance formula, and the same idea applied to a single batch is in the batch costing example.
Where this stops working
Doing this by hand takes four things every week: a full count, the batches made, the price of every delivery used, and someone with an evening to put them together. Miss the count and there's no actual quantity. Lose an invoice and the price variance is a guess. And it answers the question a week late, about a week that's already over, for the whole kitchen at once, so the taro paste swirl is found after six batches of it rather than after the first. It's easy to keep up for a month or two and then stop, and the variance goes back to being a feeling that food costs are high.
How TaroStack does it
In TaroStack the theoretical side is already there, because recording a batch takes each ingredient from its lot by the recipe: the five kūlolo and six sweet bread are in the system the moment they're made. The actual side comes from the same place: every ingredient was received at the price on its invoice, freight included, and each batch takes it at what that stock really cost, so the batch's actual cost sits next to its standard cost, batch by batch, without anyone matching invoices.
Counting happens on a phone, and the count shows what each gap is worth before you post it, so the 1.8 kg of taro paste is a dollar figure on Sunday rather than a number for someone to work out. Waste goes in with its reason, so the dented can is explained. And TaroStack reads your own batch history to show whether a recipe yields what it claims and which ingredient's quantity is wrong, which is how the butter missing from the recipe stops being a weekly mystery. A price-creep report per supplier shows the taro and the butter going up.
Counts, receiving and stock value are on every plan, from $49 a month; recipes, batches and true cost are on Standard at $99. The first 30 days are free, and your recipes and items import from a spreadsheet. If you'd like a hand setting up, ask, and we'll do it with you.