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Chapter 4

Composite (potential) food cost percentage The weighted average food cost percentage for all food items sold, weighted by the quantity of each item sold
Contribution margin (CM) The amount left over after the food cost of a menu item is sub- tracted from the menu selling price
Contribution margin method (pricing) Adding the contribution margin (CM) figure to the cost of a menu item to determine that items price
Demand-driven pricing The theory that an operation can set pricing based on demand for the product or service
Factor method (pricing) A popular formula used to determine menu prices based on the standard food cost percentage aka simple markup or food cost percentage method
Food cost percentage method (pricing) A popular formula used to determine menu prices based on the standard food cost percentage. This method is also known as simple markup method or factor method
Market-driven pricing Pricing that is determined by the market, which is usually regional
Market price A menu pricing strategy in which the price of a menu item changes based on the current market
Markup The difference between the actual cost of production an item and the price listed on the menu
Markup differentiation Giving different markups to different categories of food, according to a range of expectations I the market
Menu engineering The process off analyzing the menu product ,is, along with consideration of an items contribution margin and its popularity
Menu matrix The placement of menu items in different categories based on their popularity and profitability
Menu product mix A detailed analysis that shows the quantities sold of each menu item, alongmwith their selling prices and standard portion costs
Price-value relationship The connection between the selling price of an item and its worth to the customer
Prime cost method (pricing) A method that requires managers to determine the amount of direct labor spent in preparing an item; this number is added to the food cost to arrive at the prime cost
Q factor The quotient or cost of all other food items served with an entree the cost includes side dishes and garnishes as well as all complimentary items such as condiments seasonings Coffee creamer sweetener
Ratio pricing method A ratio derived by takinG the sum of all nonfood costs , adding it to the target profit ,and dividing the resulting number by the cost of food sold in dollars
Value perception A customers opinion of a products value to him or her