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F INANCIAL A NALYSIS AND P ROGRAM E VALUATION S ECTION 4Cost of Purchased Food UsedSchool foodservice administrators need to know how much money they spend on purchased food used during a givenperiod of time. This is important information that is used to determine whether costs are within guidelines and funds thatare available to cover costs. The cost of purchased food used is included in other calculations that might be helpful to theadministrator. For example, the cost of purchased food used must be calculated before the school foodservice administratorcan determine meal costs.A physical inventory must be taken consistently and on a regular basis (a minimum of a monthly inventory isrecommended) to obtain current and accurate results. At the end of the accounting period, the food inventory is taken, thevalue of the food inventory is calculated, and the cost of purchased food used for the period is determined as follows:Cost of Purchased Food Used = Beginning Purchased Food Inventory+ Food Purchases= Total Purchased Food Available– Ending Purchased Food Inventory= Cost of Purchased Food UsedExample: Annually MonthlyBeginning food inventory $8,000 $8,000Food purchases 300,000 25,000Food available 308,000 33,000Less: ending food inventory 7,000 7,000Cost of purchased food used $301,000 $26,000Streamlined Commodity InventoryWhen calculating the cost of food used, the value of USDA-donated commodities must be considered. USDA has recentlytaken steps to more fully integrate commodities with other foods utilized by school nutrition programs. This has resulted inpurchased and commodity food items being accounted for in one inventory. The intent is to reduce cost and provide moretimely deliveries. Under the single inventory concept, cost of food used may include the value of USDA commodities.The guidelines for the single inventory concept are as follows:• Inventories of donated foods are no longer required to be separate from inventories of other foods.• Most commodities are packed with commercial labels instead of USDA labels.• Procedures may differ from state to state in commodity inventories.Some states continue to provide school districts with commodity information that includes the per-case value. Thecommodity value is entered into the district accounting records separately from the cost of purchased food. This allows theschool district to calculate both the cost of purchased food used and the value of USDA-donated commodities used in thereporting period.67N ATIONAL F OOD S ERVICE M ANAGEMENT I NSTITUTE
S ECTION 4FINANCIAL A NALYSIS AND P ROGRAM E VALUATIONPer Meal CostsThe cost of producing a meal is a critical piece of information for the school foodservice administrator. Meal cost isdetermined by dividing total expenditures for a given reporting period (day, week, month, quarter, year) by total mealequivalents during the same period. Expenditures include all costs to the school foodservice program, including food costs,labor costs, supply costs, and all other costs. These costs categories are illustrated below.Food CostsCost of purchased food usedValue of USDA commodities (if available)Labor CostsSalaries and wages, including administrative office salariesEmployee benefitsSupply CostsGeneral operating suppliesFood production suppliesExpendable equipmentOther CostsCapital equipmentRepairs, maintenanceProfessional development (travel, conferences, training, etc.)Overhead (utilities, communication, and other appropriate costs as defined by state guidelines)Indirect (charges from district).N OTEThis listing is not exhaustive. Each school foodservice program must includecosts unique to its operation. The important point is that all costs be includedso that an accurate result is achieved.Per Meal Cost CalculationWhen expenditures are categorized, each cost category—food, labor, supply, and other costs—can be calculated per meal. Forexample, purchased food cost per meal can be calculated using the following formula:Costs of Purchased Food UsedTotal Lunches + Meal EquivalentsThe formulas for labor and supply costs are listed below. School foodservice administrators can use the formula also tocalculate per-meal costs for other expenditure categories.Labor CostsTotal Lunches + Meal EquivalentsSupply CostsTotal Lunches + Meal EquivalentsN ATIONAL F OOD S ERVICE M ANAGEMENT I NSTITUTE 68
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NATIONAL FOOD SERVICE MANAGEMENT IN
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This publication has been produced
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TASK F ORCE M EMBERSSincere appreci
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N ATIONAL F OOD S ERVICEM ANAGEMENT
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I NTRODUCTIONFINANCIAL MANAGEMENT I
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S ECTION 1IDENTIFICATION AND CLASSI
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S ECTION 1IDENTIFICATION AND C LASS
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S ECTION 2BASIC FINANCIAL STATEMENT
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Page 87: ReferencesCater, J., & Mann, N. (19
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