If you don't know exactly what a dish on the menu costs you, your price is just a guess; a product you think is profitable may actually lose money. Recipe cost is the total cost of all ingredients in a product at their current prices. This post explains how recipe cost is calculated and the AVCO and food cost logic, step by step.
1. Ingredient Price and Portion
Determine each ingredient's unit price and the amount used in that dish (portion/grams). Cost = the sum of (quantity × unit price) for each ingredient. Correct portions depend on correct inventory tracking; we covered it in restaurant inventory tracking.
2. What Is AVCO (Average Cost)?
Ingredient prices change with every purchase. AVCO (average cost) updates the average unit cost by combining existing stock and the new purchase. So recipe cost is based on the real average cost, not the last invoice — a critical difference under inflation.
3. Food Cost Ratio
Food cost ratio = recipe cost ÷ selling price. This ratio shows how profitable a product is; there are commonly accepted bands, but the ideal varies by concept. Watching it regularly lets you justify price increases with cost.
Recipe Cost and AVCO with RoxPos
RoxPos's recipe and cost management defines recipes with ingredients and portions; with AVCO it calculates the real average cost automatically and shows product profitability clearly. Integrated with stock, every purchase updates cost and each sale deducts stock — a solid base for menu engineering and correct pricing.