The production and service of meals to older 

individuals is, in reality, a food service business 

and must be operated as such. A food service 

business is a complex organization, and food 

service operations can be difficult for someone 

not trained or experienced in food services to 

understand.

WHY DOES THIS MATTER?

For cost effective program operations, programs 

providing meals to older individuals need 

to know the total cost of the meals they are 

serving to their participants. Accurate meal cost 

calculations are not only necessary for efficient 

use of available resources, but they are also 

needed if programs wish to sell meals to other 

organizations or programs.

WHAT DO YOU NEED TO KNOW?

Calculating accurate costs for both program 

food costs and total meal costs is important 

for successful long-term program operations 

in today’s competitive environment. As the 

population throughout the United States 

continues to age, there will be increasing 

demand for both congregate and home delivered 

meal services as more older individuals will 

want to stay in their homes. As the demand for 

their services is increasing, many programs are 

finding that the government funding that they 

have relied upon is increasingly limited, relative 

to the number of participants they need to 

serve. At the same time, the increased demand 

for services is drawing for-profit firms into this 

market. Thus, programs are now operating 

in a competitive market and are needing to 

“bid” for the right to provide meal services to 

the older individuals in their communities. To 

be competitive in this market, programs must 

have accurate costs and must understand the 

relationship of the costs they incur to the meal 

services they are providing, or hope to provide, 

to program participants. A solid understanding of 

basic accounting terminology is necessary when 

calculating food and meal costs.

Inaccuracies in meal cost accounting can 

potentially lead to:

✓ Inaccurate budget planning

✓ Shortfalls in projected revenue resources

✓ Inability to meet the community need for

services

✓ Poor operating controls needed to identify

inefficiencies and product waste that

contribute to excessive meal costs

✓ Lower quality meals and lower client

satisfaction

✓ Inability to compete with other non-profit or

for profit on nutrition service contracts

MEAL COST CALCULATIONS 

DEFINED

Food Cost

Food cost is the cost of only the food used 

to prepare meals served to a program’s 

participants.

✓ A program preparing its own meals would

include ONLY food, and not any other costs,

such as the cost of packaging or cleaning

supplies, when calculating food cost.

✓ A program purchasing prepared meals would

use the per meal cost paid to the meal

provider as their “food cost” when calculating

their total meal cost.

Adjustments would include anything that is 

either added to the food supply for participant 

meals or which reduced the supply because 

the food was used for other purposes (i.e., 

employee or volunteer meals and contributions 

to the program). Careful inventory management 

and control of food production operations are 

important ways for programs to manage their 

food costs.

FOOD

COST

Beginning

Inventory

Program 

Purchases

Ending

Inventory

Adjustments

+ - +/- Inventory =

The National

Resource Center on

Nutrition & Aging

Identifying The Total Cost Of A Meal

One-Page Summary
Total Meal Cost

Total meal cost includes ALL costs associated 

with the production and service of meals to 

program clients. Both direct costs (e.g. food, 

packaging) and indirect costs (e.g. administration 

costs, insurance) must be included in these 

calculations. All direct costs, such as raw food or 

the cost of purchased meals, are included in the 

total meal cost calculations.

Costs to be considered in Total Meal Cost 

Calculations include but are not limited to:

✓ Raw Food

✓ Purchased meal cost

✓ Paid food service labor

✓ Utilities

✓ Kitchen supplies

✓ Kitchen equipment

✓ Meal packaging supplies

✓ Building costs

✓ Management costs

✓ Operating costs

✓ Professional fees

✓ Transportation

✓ Training – staff development

✓ Donations

✓ Volunteer labor value

REIMBURSEMENT RATES

CONTRACTED OR NEGOTIATED

A program’s total meal cost is NOT the same value as the program’s reimbursement (contracted, 

negotiated) rate. While the total meal cost should 

be an accurate reflection of what it actually 

costs a program to produce and serve a meal 

to a participant, the reimbursement (contracted, 

negotiated) rate is the amount that a program 

negotiates with a funding source (usually a government agency, but may also be a private funding source). This rate is not likely to be the same 

amount as the program’s total cost per meal and 

will permit a full cost recovery.

CONCLUSIONS

In today’s rapidly changing environment, 

accurate calculations of total cost per meal is 

essential to a program’s long-term “survival” and 

its ability to effectively meet the needs of an 

ever-growing number of participants. Accurate 

costs are needed for negotiating contracts with 

government and non-governmental funding 

organizations, as well as the determination of 

return on investment and cost-effectiveness. If 

accurate costs are not known, programs cannot 

determine ways in which cost savings might be 

realized and/or cannot evaluate their impact on 

programmatic or client outcomes realized.

FOR MORE INFORMATION

Dittmer, P.R. & Keefe, J. D. Principles of Food, Beverage, and Labor Cost Controls. 9th Ed., Hoboken, NJ: John Wiley 

& Sons, Inc., 2009.

Identifying and Valuing In-Kind. Technical Assistance Memorandum AAA-TA200. Texas Department of Aging and 

Disability Services. 

Laube, J. & Shuster B.K. Uniform System of Accounts for Restaurants, 8th Ed. Washington, D.C.: National Restaurant 

Association, 2012.

Tools for Community Based Organization. The SCAN Foundation. 

http://www.thescanfoundation.org/tools-community-based-organizations

Written by: Audrey C. McCool, EdD, RD, FADA. Commissioned by the NRCNA.