Mary Jo, are there other issues that we need to be concerned with? If so I might try and play nice. If not then I would fax the auditor and their supervisor (always do this in writing), explaining why the food is 100% deductible, and if they disagree you will take the issue to appeals. I would then ask that if they will not consider this issue as you explained it, then they get you a list what else they need so the audit can be wrapped up.
Call their bluff and go to appeals.