Midnight approaches as Michel Fitoussi finishes work in his kitchen. Another day, another $250 worth of fruit and vegetables, more than $400 worth of meat. In all, nearly $1,500 worth of food prepared tonight. No, Fitoussi does not run the largest soup kitchen in Manhattan. He runs a very small restaurant, where that $1,500 worth of ingredients fed 30 mouths at dinner. Those fortunate few consumed $160 worth of fresh goose liver (two pounds), $300 worth of caviar (a pound). They went through a case of lobsters. They probably didn't touch half of the tiny pastries in carts festooned with sugar flowers. And the fruits -- kiwis, mangoes, papayas, tiny passion fruits that cost $1 each -- undoubtedly went uneaten.

Michel Fitoussi, age 27, a bachelor as slim and lithe as the proverbial disco dancer he is between midnight and dawn, has for two years commanded the kitchen of the Palace restaurant in New York, famous for its exquisite cuisine and lavish serice, infamous for its prices. Gilt and guilt marry as well as foie gras and truffles at this most expensive of American restaurants, where the average couple (the Palace's average couple, that is) spends $300 to $400 for dinner, unless they go all out for the gala, top-of-the-line menu for an average of $450 to $500 a couple. The fixed-price menu costs $95 ($150 for the cavier-and-truffle-laden gala), but to that one must add liquor and wine, tax and the automatic 23 per cent tip. Diners at the Palace tend not to cut corners on any of those fringe costs.

Should anyone be driven to try in Washington, one could spend $300 a couple for dinner by ordering a many-course meal at one of the city's top French restaurants. But, except through a luxuriance of wine consumption, it is rare. Still, the $50 dinner has become commonplace where two years ago it was unconscionable, and in the near future the notion of the Palace's extravagance may lose its shock value as has nudity in films.

So, before the $200 dinner is dismissed as irrelevant or disgusting, look at what it is so that in the future you might remember how much $200 used to buy. While it is indeed extravagance, it is far from being profiteering; in fact, even today the Palace hardly makes a profit.

Most restaurants aim for a food cost that is 30 percent of the selling price of their food, and consider 33 percent the maximum they can spend on raw ingredients and still make money. The rest of the cost is apportioned between staff salaries, rent, furnishings and such. At the Palace the food costs total 40 percent. Consider that the fruits and vegetables, often featuring such rareties as fiddlehead ferns and tiny fresh artichokes, cost more than $8 a person. The ducks and chickens are bought fresh -- and whole, from head to feet. On the gala dinner, the truffle soup alone uses more than $9 worth of truffles.

Yet it is hardly the ingredients that make the magic (and notice that the word is magic, not sleight-of-hand) that is the Palace's $200 dinner. There is the matter of workmanship.

Look at a day in the life of Michel Fitoussi. It is a long day, or at least short on sleep. True, he doesn't come to work until the afternoon, because the Palace serves only dinner, Monday through Saturday (unless Fitoussi is not working -- then it is closed until he returns). He has spent his morning playing tennis, swimming or gathering a few more dents in his sports car. And thinking food.

Arriving at the restaurant in a sweater fit for the slopes of Chamonix, sleeves pushed up past his elbows, Fitoussi whips into white jacket, apron and chef's hat and switches from bon vivant to workhorse. His staff of 14 are deployed throughout the downstairs kitchen making pastry and doing pre-preparation and the upstairs kitchen where the final cold preparations and cooking are done. Downstairs they are rolling pastry for miniature tarts, carving vegetables into tiny batons to be tied to leek shreds into precise bundles. Fitoussi rolls puff pastry for wrapping fish. A stripped bass is filled with fenel seeds -- an alarming amount until it is explained that the crust is discarded and the fish fileted, flamed in Pernod and sauced with sorrel cream at the table. The pastry fish is cut into shape, scales etched with the edge of a pastry tube, the surface brushed with egg. And Fitoussi has gone on to the next task. By now the staff is totally busy preparing dinner for the 30 to 50 diners expected that night.

The caviar man arrives, bringing a flurry of conversation into the quiet kitchen. Fitoussi tastes the black fish eggs and orders.

Next comes the produce man. Fitoussi needs fresh white asparagus, spaghetti-thin green beans, perfect black cherries; he needs this man. He examines each crate of fruit, only gently berating his friend for yesterday's flavorless mangoes.

Friends are vital to such an ambitious kitchen. A buddy brings three pheasants he shot, carrying them in a Vuitton bag. He aggres to exchange them with Fitoussi for one of the three pheasant terrines they will produce.

Fitoussi begins to pace and sweat like an addict in need of a fix, only in this case the fix is foie gras. The foie gras lady is late, and he is worried. When she arrives, he embraces her in relief. His larder is complete.

The staff work in polite silence, like a surgical team, but each request is prefaced with "please." They sit together briefly for a dinner of steak and sauteed potatoes. Afternoon turns to evening. Then the real work starts.

First come the sauces. Fitoussi brings from the refrigerator his thick pastes that are the concentrated sauce bases -- espagnol, fish, beef glaze -- and thins them with wine and cream, adding sorrel, tarragon, basil or peppercorns. He tosses in salt and pepper, thickens them slightly with arrowroot. In rapid succession he cooks the sauces, tastes them, strains them and sets them aside for their last-minute finish, which is done to order. A cook is tossing julienned vegetables in a large pot. Another is readying the cold ingredients for appetizers and salads.

One of the extravagances at the Palace is that everything is cooked to order. Besides not starting the sauces until early evening so that they will taste very fresh, Fitoussi roasts the ducks, poaches the chickens to order. Only the vegetables are blanched ahead of time and cooked through at the last minute. That takes a lot of staff. And Fitoussi, sauteeing meats and seasoning sauces, drinking endless glasses of ice water as the gas ranges heat even the counters to cooking temperature, has to be able to trust his staff to send out each dish as perfect as one expects for such a price.

The first orders come in; all of them are delivered directly to Fitoussi. at the cold station, smoked salmon is being sliced for each order and spread with creme fraiche, topped with an immense dollop of caviar, and rolled into a log to be placed in a just-baked puff pastry boat, its edges dipped in mayonnaise and chopped egg with parsley. The roll is decorated with more caviar. Then the small tart is set on a huge silver tray decorated with a tallow fisherman catching chrysanthemums in his net. Each cold dish has its own decoration handmade by Fitoussi: a carved tallow octopus; a Lalique bowl and a hoop-skirted girl, her skirt made from lobster telsons.

Kitchen shelves are lined with galleons made of fried bread, log cabins formed of chocolate, bread baskets filled with bread flowers. Each course, served on a monumental silver tray, holds one of these sculptures; the meat dishes, in addition, are set with the leek-tied bundles of vegetables and lacy baskets of tiny pommes soufflees. This handwork is part of what costs $95 for the Palace's fixed-price meal.

Meantime the dining room is also spending money as fast as it is earned. The water glasses, wine glasses, cocktail tumbers are all Waterford crystal; at $30 to $35 apiece, three broken glasses can account for the cost of one meal. Most diners drink two cocktails before dinner, primarily martinis and whiskey sours, at $6 each. Even Perrier costs $5 -- remember, you are renting that Waterford glass to drink it in -- or you could splurge after dinner on a 1945 Port ($30) or cognac for as much as $80 a snifter.

The dining room is divided by columns and draperies to make the tables feel semi-private without shutting off the view, the view being of silver and crystal enough to illuminate the room on its gleam alone. A silver cart for presenting roasts is worth more than Fitoussi's sports car and undented. The silver winestands take a strong man to lift them. The niches are set with sculptures on marble pedestals. Everything that is not gold or silver or crystal or marble is simply silk. The salt shakers are silver filigree, the china Lenox and gold-rimmed.

One's table is reserved for the entire evening, and the entire dining room staff of 10 or 12 serves each table, moving around the room from one table to another to replay the show. The silver trays bearing each dish are shown to the diners, carved and sauced at a tableside cart, arranged precisely on a plate, then presented with a flourish. The handcrafted feast progresses from appetizer (lobster salad, caviar, fish pate with foie gras) to soup (lobster bisque or the celebrated saffron-tinted mussel soup). Next is the fish course, perhaps barely cooked shellfish with Fitoussi's nests of angel-hair pasta. Then comes sherbet to clear your palate, with liquor poured over it from a bottle encased in ice set with pink roses. The meat course -- baby-soft rack of veal or freshly crisped duck, perhaps --is garlanded with vegetables. Then salad, cheese -- including a roquefort napoleon -- with a basket of those exotic fruits. Finally comes a parade of a half-dozen desserts -- from white chocolate mousse in nougatine cup with strawberry sauce to the miniature sugar wagon of exceptional tiny pastries to filled chocolates made in special molds.

The wine list is an outrage, obviously attempting to compensate for the 40 percent food costs. With 1971 Dom Perignon at $145, you ought to be able to take home the glasses.

Of course, people who dine at the Palace don't usually care, at least for the evening. More and more -- 40 percent at last count -- are ordering the gala rather than the regular dinner. A dozen private parties have taken over the restaurant for the evening, at an average of $15,000 each. Nobody is sure who is paying all those Palace checks, but the restaurant estimates that 50 to 90 percent of the diners are on expense accounts.Fitoussi insists that the diners are mostly "average people" who come on one grand occasion, then take a year or two to pay the credit card bill. "They love it," says Fitoussi. "They don't understand what makes it so good, but they do recognize that it is good."

Most of the diners are from outside New York, many "very big money" from Mexico who never even bother to look at the check, and often Arabs who, according to Fitoussi, come in large family groups late at night and eat very quietly. Every night now, he adds, one table is filled with restaurant professionals who want to see what he is doing. For New Year's a party of 30 Texans is flying in for an $800-a-couple dinner. Are the Palace's diners people who know about food? The R. C. Auletta firm, which handles the Palace's public relations, answers, "Well, they are people who think they do."

The customers have some expert support. Gault-Millau, among the most prominent of French food critics, has called the Palace "the best New York has to offer and without a doubt the finest in the U.S.A."

Fitoussi worries that his prices may have prejudiced other food critics against him, though he happily accepts the assessment of the Palace as unique. His is the world's only restaurant serving distinguished original food in an elaborate total presentation, he says. It is a presentation in a silver and crystal gallery in which each dish is framed like a Renaissance portrait. The tallow sculptures, the bread dough baskets, the sugar carts, the full regalia laid before each diner with each dish each night is the last gasp of culinary grandeur.

Do the Waterford crystal, heirloom chandeliers and effusion of caviar add up to a qualitatively different artistic experience, or are they marginal flourishes to the culinary glory Fitoussi could serve at a fourth the price? That depends on the diner's values.

The same people who are outraged at Palace prices unflinchingly will cover two feet of wall space with a thousand dollar's worth of oil paint or support operatic productions that require extraordinary expense for costumes, sets, performers and backstage help. Fitoussi's cusine is undeniably art of a high caliber, and art, as any auctioneer can tell you, is an expensive luxury. But culinary art involves a different set of emotions than most other art forms.

Where should the guilt over such culinary extravagance lie? In the chef who plays with truffles and foie gras as everyday staples? The diner who spends his affluence on fleeting pleasures rather than a Betamax? On corporations that squander their expense accounts on edibles instead of thicker carpeting in their lobbies? We might as well blame the sturgeon who laid those slate black gems of caviar.