How to Cost a Menu Item Before Setting Your Selling Price

A dish can be popular and still earn less than you expect. The chicken and rice may seem inexpensive, but sauces, garnishes, packaging, preparation waste and delivery fees all affect what remains from each sale.

Before putting a price on your menu, work out what one consistent serving costs to make and sell.

1. Write down the exact portion

Start with a recipe for one serving. Record the quantity of every ingredient, including small additions such as oil, seasoning and garnish.

If one cook uses 120 g of chicken and another uses 180 g, the dish will cost a different amount each time. A defined portion makes both your food and your calculations more consistent.

2. Convert pack prices into portion costs

Use the quantity you actually put into the dish. If a 1 kg pack costs S$10 and one serving uses 100 g, that ingredient costs S$1 per serving.

For ingredients bought by the bottle or carton, estimate how many portions the usable contents produce. Review the figure after you have made and sold the dish several times.

3. Add every ingredient

Here is an illustrative example for a chicken rice bowl. These figures are made up to show the method; they are not ZaHuoDian product prices.

 

It is easy to count the chicken and rice while overlooking the sauce used in every order. Small costs matter when you sell the dish repeatedly.

4. Allow for preparation loss and waste

You may buy more than you can serve. Peeling, trimming, occasional spoilage and portions that do not sell all affect your actual cost.

For this example, let us add S$0.30 per bowl as an estimated allowance. The exact amount should come from your own purchasing and kitchen records, not a fixed percentage copied from another business. Managing portions and food waste can help keep this figure under control. 

The running cost is now S$3.25.

5. Include packaging and sales channel costs

If the bowl is sold for takeaway, add the container, lid, bag and any utensils you provide. Suppose these cost S$0.45 per order. The direct cost of this example bowl becomes:

S$ 2.95 ingredients + S$ 0.30 waste allowance + S$0.45 packaging = S$3.70

If you sell through a delivery platform, its fees also need to be included when assessing that channel. The economics of a dine-in, direct takeaway and platform order may differ even when the food is identical.

6. Check what is left at your proposed price

Suppose you are considering a selling price of S$9.90. Subtracting the S$3.70 direct cost leaves S$6.20.

That S$6.20 is not profit. It still has to help pay for wages, rent, utilities, payment fees, equipment and other business expenses. If you use a delivery platform, deduct its applicable fees too.

Ask whether the dish can contribute enough towards those costs at the number of portions you realistically expect to sell. A low cost per bowl does not help much if the item takes too long to prepare or rarely sells.

7. Compare the price with the customer’s experience

Your calculation gives you a starting point, but customers will judge the complete offer: portion size, taste, convenience, presentation and price.

If the price you need seems too high for your intended customer, revisit the dish. Could you reduce waste, adjust the portion thoughtfully, use an ingredient across more menu items or change the sales channel? Avoid shrinking the portion without considering how it affects the meal customers expect.

8. Recalculate as your business changes

Ingredient prices, supplier pack sizes and customer demand can change. Review your costing when a supplier changes its price, you alter the recipe, or you notice more waste than expected.

If your business is GST-registered, account for GST when setting and displaying prices. IRAS has specific price display guidance for food and beverage businesses, including an exception that may apply to establishments imposing a service charge.

A simple costing record to keep

For each menu item, record:

• The ingredients and quantity used per serving
• The latest purchase price and pack size
• The cost of packaging
• A realistic allowance for preparation loss
• The selling price for each sales channel
• The date the costing was last checked

Start with your best-selling or most expensive dishes. Once you know their true costs, you can make better decisions about prices, portions and which ingredients to buy in larger quantities.

Browse ZaHuoDian’s F&B & Business collection to compare available cooking ingredients and pack sizes. If your F&B business needs larger quantities or other products, contact ZaHuoDian to discuss your requirements.