Do you include paper and cleaning products when figuring out food and labor costs?
Paper yes, but not cleaning supplies. The only thing you should include in food costs are the expenses that are directly incurred as the result of a sale. You’re going to use about the same about of chemicals regardless of your sales.
Thanks guest.
I only considered paper items like napkins, quick wrap, cups, and boxes as part of my food cost. I did not consider paper items such as towels, toilet paper, seat protectors, togo menus, flyers, and things like that into food cost. Am I going about it the wrong way?
No, you’re 100% correct. I guess I should have clarified “paper” a bit in my previous post (I’m the same “guest” that answered last time.) You only include the paper that goes into making a sale in your COGS. Everything else is a regular expense.
Here’s another way to determine if it’s an expense or a cost of goods sold: If your supplier is charging YOU sales tax on it, it’s most likely an expense. If they aren’t charging sales tax, it’s because you’re reselling it. They’ll usually determine this for you automatically. You’ll notice that they probably charge you sales tax on toilet paper, chemical, etc., but not on deli-wrap, boxes, cups, etc.
Also, the customer doesn’t have to leave with something for it to be a cost of goods sold either. Example: Disposable gloves. Those are rightfully a cost of good sold item, even though you’re not selling them directly to the customer.