458133380-Chapter-1-Introduction-to-Food-and-Beverage-Control-System-ppt.ppt

cost

1. HTH250
Food & Beverage Cost Control
CHAPTER 1:
COST AND SALES CONCEPT

2. Important Concepts
Revenue is the amount of dollars you take in.
Expenses are the costs of the items required to
operate the business.
Profit is the amount of dollars that remain after all
expenses have been paid.
Revenue - Expenses = Profit

3. COSTS
There are four costs a Food Service Manager must
concern themselves with
1.Food costs are the costs associated with actually
producing the menu items. In most cases, food
costs will make up the largest or second largest
expense category you must learn to manage.

4. COSTS
2.Beverage costs are those related to the sale of alcoholic
beverages. Costs of a non-alcoholic nature are
considered an expense in the Food Costs category .
Alcoholic beverages accounted for in the Beverage
Costs category include beer, wine, and liquor. It may
also include the costs of ingredients necessary to
produce these drinks, such as cherries, lemons, olives,
limes, mixers like carbonated beverages and juices, and
other items commonly used in the production and
service of alcoholic beverages.

5. COSTS
3.Labor costs include the cost of all employees
necessary to run the business, including taxes and
benefits. In most operations, labor costs are second
only to food costs in total dollars spent.
4.Overhead costs include all expenses that are
neither food, beverage nor labor, such as utilities,
rent, linen, etc.

6. COST CONCEPT
Definition of COST:
In Accounting…
“Cost is the reduction of the value of an asset for the purpose of securing
benefit or gain.”
In terms of control…
“Cost is the expense to a hotel or a restaurant for goods or services when
the goods are consumed or the services are rendered.”

7. COST
Cost can be expressed in a variety of units
•e.g. weight, volume or total value, a glass of juice or a bottle of juice, a
portion of meat or one kilogram of meat.
Cost can be viewed in a number of different ways;
 Fixed and variable costs
 Controllable and non controllable costs
 Unit and total costs
 Prime costs
 Historical and Planned costs

8. 1) FIXED COSTS
Normally unaffected by changes in volume
But changes over time (increase and decrease)
E.g. insurance premium, depreciation etc.
2) VARIABLE COSTS
Related to business volume
Food, beverage and labor are all variable cost

9. Directly variable costs
Directly linked to business volume
Sales volume will increase or decrease in direct proportion to the
cost of the item
Semi variable costs
A portion of it changes with short-term changes in business
volume, while another portion did not.
Labor cost is a good example of this because in food service there
are two types of workers.
Fixed cost personnel: Manager, cashier, bookkeeper & chef
Variable-cost employee: Waiters and servers
Some business take all fixed cost personnel, paying staff on
regular salaries
While others may take their entire staff on hourly wages, thus
creating a variable-cost employee with its total variable cost.

10. CONTROLLABLE COST
Those that can be changed in the short term
Variable cost
The cost of F&B can be changed for example by changing the
portion size, the ingredients in the recipe and the quality of
product
The cost of labor can be changed by hiring additional staff
manipulating with the number of working hours
Some fixed cost are also controllable: Ads and promotion,
utilities and general expenses.
NONCONTROLLABLE COST
• Those that cannot normally changed in the short term
• Fixed cost
• Depreciation, license fee, mortgage etc

11. UNIT COSTS
•The unit may be food or beverage portions
•E.g. cost of one glass of juice, one steak, one portion of noodles,
one hour of working time
•Establish menu prices and determine unit profitability
TOTAL COSTS
• The total of an item served in a period of time
• E.g. total cost of food served in a week, in an hour etc.
• To determine the relationship between total costs and total sales

12. PRIME COSTS
Referring to the cost of materials and labor: Food, beverage &
payroll
Defined as the sum of food costs, beverage costs and labor
costs
Easily altered by the management for the purpose of control and
meeting business financial goal
HISTORICAL COSTS
Historical cost concept
All cost founded in business records are historical
Important to establish unit costs, determine menu prices and
comparing past and present labor costs
Used for planning future budget (budgeting)

13. SALES CONCEPT
SALES
Defined as revenue resulting from the exchange of products and
services for value
Sales = Revenue = Turnover
In F & B operations, sales concept can be expressed in
monetary and non monetary terms

14. MONETARY TERMS
TOTAL SALES
Refers to the total volume of sales expressed in dollar terms in any
given time
E.g. total sales in a week, a month, a year (in financial statement)
TOTAL SALES BY CATEGORY
Total dollar volume of sales for all items in a category
E.g. total food sales, or total beverage sales or maybe in one
particular category such as total seafood sales
TOTAL SALES PER SERVER
Total dollar volume of sales for which a given server is responsible in
a given time period
Useful to make comparison between the performance of any two or
more employees

15. TOTAL SALES PER SEAT
Total dollar sales for a given time period divided by the number
of seats in the restaurant (Total Sales / Total Seats)
Time period of a year (common)
Used by chain operation for comparing sales results of its many
outlets
SALES PRICE
Amount charged to each customer purchasing one unit of
a particular item
A single item or a meal

16. Average Sale
Is determined by adding individual sales to determine a total
and then dividing that total by the number of individual sales
E.g: Average check and average sale per server (p. 18 & 19)

17. NONMONETARY TERMS
TOTAL NUMBER SOLD
Refers to the total number of menu items sold in a given time period
Useful to distinguish between popular to non popular items on menu
Use to forecast sales therefore help in planning purchasing and
production
Helps in determining quantities in inventory and sales records
COVER
Used to describe one diner regardless of the quantities of item he
consumes (pax = cover)
TOTAL COVERS
Refers to the total number of customers served in a given period (an
hour, a day etc.)
To make comparisons and to see the business trends

18. AVERAGE COVERS
Total number of covers in a period of time / a number
SEAT TURNOVER
• Refers t the number of seat occupied during a given period
• Often calculated based on a given meal period
SALES MIX
•is a term used to describe the relative quantity sold of any menu
item as compared with other items in the same category (p. 21-22)
Covers Per HourCovers Per Hour Total covers / number of Total covers / number of
hours of operationhours of operation
Efficiency of service in Efficiency of service in
dining roomdining room
Covers Per DayCovers Per Day Total covers / number of Total covers / number of
day of operationday of operation
Effectiveness of a Effectiveness of a
promotional campaign promotional campaign
Covers Per ServerCovers Per Server Total covers / number of Total covers / number of
serversservers
Effectiveness of a Effectiveness of a
particular serverparticular server

19. Understanding the Profit and
Loss Statement
The primary purpose of preparing a P&L is to identify
revenue, expenses, and profits for a given time period.
Common percentages used in a P&L statement:

20. THE COST-TO-SALES RATIO: COST PERCENT
2. Labor Cost
Revenue = Labor Cost %
3. Overhead Cost
Revenue = Overhead Cost %
4. Profit
Revenue = Profit %
1. Food and Beverage Cost
Revenue = Food and Beverage
Cost %
p. 23

21. Simplified Profit and Loss
Statement
Sales ______ 100%
Food Cost349,725 33%
Labor Cost______ 29%
Overhead______ _____
Profit ______ 7%

22. Cost Percent
Percent (%) means “out of each hundred.”
There are three (3) ways to write a percent:
Common Form In its common form, the "%" sign is used to
express the percentage, as in 10%.
Fraction Form In fraction form, the percent is expressed as the
part, or a portion of 100, as in 10/100.
Decimal Form The decimal form uses the (.) or decimal point
to express the percent relationship, as in 0.10.

23. COST
SALE COST %
COST AND SALES
CONCEPTS
a)Cost = Sale x Cost %
b)Sale= Cost
Cost %
c)Cost % = Cost
Sale

24. 1.Given the following information, calculate cost
percentages. Round your answers to the nearest tenth of
a percent.
a)Cost $200.00; Sales $500.00
b)Cost $150.00; Sales $500.00
c)Cost $178.50; Sales $700.00
d)Cost $216.80; Sales $800.00
e)Cost $127.80; Sales $450.00
f)Cost $610.00; Sales $2,000.00
Exercises:

25. 2.2.Calculate cost, given the following figures for cost percent Calculate cost, given the following figures for cost percent
and salesand sales
a)a)Cost percent 28.0%; Sales $500.00Cost percent 28.0%; Sales $500.00
b)b)Cost percent 34.5%; Sales $2,400.00Cost percent 34.5%; Sales $2,400.00
c)c)Cost percent 24.8%; Sales $225.00Cost percent 24.8%; Sales $225.00
d)d)Cost percent 31.6%; Sales $1,065.00Cost percent 31.6%; Sales $1,065.00
e)e)Cost percent 29.7%; Sales $790.00Cost percent 29.7%; Sales $790.00
f)f)Cost percent 21.2%; Sales $4,100.00Cost percent 21.2%; Sales $4,100.00

26. 3.3.Calculate sales, given the following figures for cost percent Calculate sales, given the following figures for cost percent
and costand cost
a)a)Cost percent 30.0%; Cost $90.00Cost percent 30.0%; Cost $90.00
b)b)Cost percent 25.0%; Cost $500.00Cost percent 25.0%; Cost $500.00
c)c)Cost percent 33.3%; Cost $1,000.00Cost percent 33.3%; Cost $1,000.00
d)d)Cost percent 27.3%; Cost $1,300.00Cost percent 27.3%; Cost $1,300.00
e)e)Cost percent 24.5%; Cost $88.20Cost percent 24.5%; Cost $88.20
f)f)Cost percent 34.8%; Cost 1,113.60Cost percent 34.8%; Cost 1,113.60

27. 4.4.Sales records for luncheon in the Newmarket Restaurant Sales records for luncheon in the Newmarket Restaurant
for a recent week were:for a recent week were:
a)a)Item AItem A 196196
b)b)Item BItem B 7272
c)c)Item CItem C 142142
d)d)Item DItem D 2424
e)e)Item EItem E 112112
f)f)Item FItem F 224224
g)g)Item GItem G 162162
Given this information, calculate sales mix.

28. 5.5.Calculate the average dollar sale per customer from the Calculate the average dollar sale per customer from the
following datafollowing data
a)a)Sales: $1,000.00; number of customers: 125Sales: $1,000.00; number of customers: 125
b)b)Sales: $1,300.00; number of customers: 158Sales: $1,300.00; number of customers: 158
c)c)Sales: $8,720.53; number of customers: 976Sales: $8,720.53; number of customers: 976

29. 6.6.The table below indicates the number of covers served The table below indicates the number of covers served
and the gross sales per server for one three-hour period in and the gross sales per server for one three-hour period in
Sally’s Restaurant. Determine: Sally’s Restaurant. Determine:
(a) the average number of covers served per hour per (a) the average number of covers served per hour per
server, and server, and
(b) the average sale per server for the three-hour period.(b) the average sale per server for the three-hour period.
ServerServerCovers servedCovers servedGross sales per serverGross sales per server
AA 7171 $237.40$237.40
BB 6666 $263.95$263.95
CC 5858 $188.25$188.25