A system and method for determining a commanded engine and motor torque to minimize fuel consumption and manage battery state of charge in a hybrid electric vehicle. The method includes determining a penalty factor value that dictates the usage of the battery. A cost value is determined for every feasible engine torque for a selected or demanded vehicle torque and speed request. Each cost value is determined by a fuel consumption value, a change in the battery state of charge and the penalty factor value. The change in the battery state of charge is determined from the motor power and a nominal battery state of charge. For a specific penalty factor, a look-up table for optimal engine torque is generated for different requested vehicle torques at various vehicle speeds. A separate look-up table is provided for each penalty factor.