Week 2 Individual Project 1

Deliverable Length: 200 – 250 words

Course Objectives

• Write product and purchasing specifications

Assignment

The menu and its prices have a direct influence on an operation’s profit. Knowing the cost of everything on the menu is the only way to accurately identify high- or low-profit items. Along with the cost of the product, other major costs that should be considered in menu pricing would be labor cost and operating expenses.

Setting menu prices is more of an “art” than a mathematical equation. While food costs, labor costs, operating expenses, and using menu pricing formulas based are very important there are also quantifiable and non-quantifiable approaches to setting menu prices. Establishments use a variety of methods to calculate markup and determine selling prices. They may include:

• The factor method, also called the food cost percentage pricing method or the simple markup method
• The contribution margin (CM) pricing method
• The ratio pricing method
• The prime cost pricing method