𝗣𝗗𝗙 | On Mar 1, , Chittatosh Bhattacharya and others published Maintenance Planning & Cost Control beijuaganette.ga productivity and labor cost reports should reflect the project budget. Therefore, the There are three basic Cost Control Reports. They are the. Food and beverage cost control / Jack E. Miller, Lea R. Dopson, cost control, the reader of this book will find the practical aspects of cost.
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Keys to Effective Project Cost Management. 6. Essential Features of Project Value Management. 8. Organization of the Book. 9. Experience Cost Accounting in the Real World withNew Videos!No additional cost when packaged with a new book!Deve. Understand the purpose and importance of cost control. □ Identify the nature of cost The book has been divided into three sections. The first of these provides .
If man- agement focuses on controlling costs more than on servicing guests. The question is whether costs are too high or too low. Because that is true. Managers who. The reason is quite clear. Ex- penses. While some short-term savings may result. As an effective manager.
It is important to remember that guests cause businesses to incur costs. The Reward for Service 3 agement provides the opportunity for creativity in a variety of settings. When this level of service is achieved. The Reward for Service There is an inherent problem in the study of cost control or.
For the purposes of this book. Note that profit must be taken out at some point in the process. Figure 1. As a business operator. The dollars that remain after all expenses have been paid represent your profit. In most business dining situations. The truth is. Hector supplies the foodservice to a large group of office workers. Hector is the foodservice manager at the headquarters of a large corpora- tion.
If you find that. In all cases. In this situation. In some cases. Every foodservice operator is faced with the following profit-oriented formula: For example. In fact. Whether you manage a foodservice operation in a profit or a. Desired profit is defined as the profit that the owner wants to achieve on that predicted quantity of revenue.
If these tools are utilized properly. This formula clearly places profit as a reward for providing service. When foodservice managers deliver quality and value to their guests. Profit is the result of solid planning. Profit should not be viewed as what is left over after the bills are paid.
This book will help you to do just that. Revenue varies with both the number of guests frequenting your business and the amount of money spent by each guest. The focus of this text is on managing and controlling expense. Revenue dollars are the result of units sold.
Marketing efforts. Revenue To some degree. Adding seating or drive-in windows. Suggestive selling by service staff. Effective cost control. While the two are clearly related.
No amount of effective expense control can solve the profit problems caused by inadequate revenue resulting from in- ferior food quality or service levels. This is true because the profit formula begins with revenue. These units may consist of individual menu items. It takes an astute foodservice operator to consistently make decisions that will maximize revenue while holding expenses to the ideal or appropriate amount. You can increase revenue by increasing the number of guests you serve.
Experienced foodservice operators know that increasing revenue through adding guests.
Food and Beverage Cost Control, 6th Edition
Desired profit and ideal expense levels are not. Examples include franchise fees. When computing food costs. The Reward for Service 7 Expenses There are four major foodservice expense categories that you must learn to control. Labor Costs Labor costs include the cost of all employees necessary to run the business. Beverage Costs Beverage costs are those related to the sale of alcoholic beverages.
Others prefer to place the cost of managers in the other ex- pense category. They include the expense of meats.
This expense category would also include the amount of any taxes you are required to pay when you have employees on your pay- roll. Labor costs 4. If management is included as a labor cost rather than an other expense. This category may also include the costs of ingredients necessary to produce these drinks. It is interesting to note that it is common practice in the hospi- tality industry to consider beverage costs of a nonalcoholic nature as an expense in the food cost category.
Alcoholic beverages accounted for in the beverage cost category in- clude beer.
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Other Expenses Other expenses include all expenses that are neither food. Other expenses Food Costs Food costs are the costs associated with actually producing the menu items a guest selects. In most operations. They are: Beverage costs 3. Some operators find it helpful to include the cost of management in this category.
Food costs 2. She is interested in comparing these re- sults to those of the prior year. Profits are greater than last year also.
Getting Started Good managers learn to understand. Tabreshia also senses that the hotel general manager. Consider the case of Tabreshia Larson. The staff. She would really like to get a handle on the problem if there is one. Tabreshia has just received her end-of-the-year oper- ating reports for the current year.
Tabreshia also feels that em- ployee theft may be occurring. The numbers she received are shown in Figure 1. The kitchen appears to run smoothly. Revenue is higher than last year. Tabreshia is concerned. How can you equitably compare your expenses today with those of yesterday. Percentage calculations are used extensively in this text and are a cornerstone of any effective cost control system.
You start with the basic mathematics skills that you must have to properly analyze your expenses. Sec- ond. First and foremost. Percentage calculations are important for at least two ma- jor reasons. Was that too much? Too little? These questions raise a difficult problem. Getting Started 9 The answer for Tabreshia.
The mathe- matics required. The answers to all of the preceding questions. Review of Percentages Understanding percentages and how they are mathematically computed is important.
If we ask how many guests will download. These tools will be sufficient to build a cost con- trol system that will help you professionally manage the expenses you incur. While this concept of changing value is useful in the area of finance.
Two units sell tacos on either side of a large city. If you thoroughly understand the concept of a percentage. The value of the dollar to- day is quite different from what it was in The following review may be helpful for some readers. We know that the value of dollars has changed over time. It is based on the fact that we count to Once that is known. The common form. If 52 percent of your employees are female.
If 15 percent of your employees will receive a raise this month. Fraction Form In fraction form. In other words.
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This is simply another way of expressing the relationship between the part 10 and the whole The numbers to the right of the decimal point express the percentage. Common Form In its common form. Decimal Form A decimal is a number developed from the counting sys- tem we use. Each of these three methods of expressing percentages is used in the foodservice industry. Each dime contains 10 pen- nies.
To convert from common form to decimal form. A large number of new foodservice managers have difficulty computing per- centage figures. If you are one of those. Getting Started 11 Computing Percentages To determine what percent one number is of another number. The process looks as follows: Many people also become confused when converting from one form of a percentage to another. It is interesting to note that. To find what percentage of your guests ordered coffee.
In a restaurant. To convert from decimal form to common form. Using Percentages Consider a restaurant that you are operating. Given these facts and the information presented earlier in this chapter. If these costs could be identified and corrected. The major cost divisions used in foodservice are as follows: Excess costs could account for the difference.
These numbers can also be expressed in terms of percentages. If we want to know what percentage of our revenue went to pay for our ex- penses. Labor cost 3.
Other expenses A modified profit formula. Food and beverage cost 2. Most foodservice operators compute many cost percentages. Food and bev- erage cost is This time. Other expense percentage equals 6. The steak- house profit equals Note the similarity to Figure 1. To put it in another way. It lists revenue. Pat earns a profit of This is done so that the food cost can be compared to food revenues. The Uniform System of Accounts is discussed in greater detail in Chapter 9 of this text.
A Uniform System of Accounts exists for restaurants. The results for them personally are promotions. This system was created to ensure uniform reporting of financial results. If you wish to succeed in the hospitality industry. Good managers influence the success of their units and their own employ- ees.
The result is the desired profit level. Good managers provide excellent value to their guests. In addition to your own efforts. It also helps these managers to quickly identify and anticipate problems associated with their costs and identify ways to correct these problems.
All of the factors that impact profit percentage are discussed in later chapters of this text. For these managers. To avoid such a set of circumstances. The foodservice director. Both commercial and noncommercial foodservice operators may use budgets.
In this case. On Monday morning. In some hospitality companies. In the summer camp example. On the other hand. Equally important. If the child. From this figure. They are most frequently used.
If these items are planned for. If too many dollars are spent on providing housing or play activities. A simple example may help to firmly establish the idea of budget and performance to budget. Budgeting is simply planning for revenue. A budget is simply an estimate of projected revenue. Number of meals served to each camper per day: In a case like this. Number of campers: The day-period approach divides a year into 13 equal periods of 28 days each.
Although using the day-period approach takes a while to get used to. The downside of this ap- proach is that you can no longer talk about the month of March. Notice that we can determine the percentage of total that should have been spent by any given day. This same logic applies to the foodservice operation. A good spending pattern could be tabulated in Figure 1. Assume that we used the expense records from last summer.
We are not in line with other expenses because they were This is often the case when one fee or price downloads a number of meals. In either case. In looking at the Camp Eureka performance to budget summary. How do we know that? If our budget was accurate and we are within reasonable limits of our budget. Profit also was outside the acceptable boundary. In some other cases. This manager has some problems.
Elimination of either is not desired. As Food- service Director. It is crucial to know the kind of problem you have if you are to be an effec- tive problem solver. With a good understanding of the relationship among revenue. Identify the problem. As you have seen. Determine the cause. This variation can be caused by costs that were either higher or lower than the amount originally budgeted or planned for. Remember that expenses create revenue. Your im- portant role as a hospitality manager is to analyze.
When you manage a foodservice operation and you find that signifi- cant variations with your planned results occur.
It can be done. The remainder of this text discusses how you can best manage and account for foodservice revenue and expense. Take corrective action. Control and management of revenue and expense are important.
Since employees do not pay for their food directly. In addition to her know-how as a foodservice manager. To help you review. In addition to food products and foodservice employees. How do you think this number should be determined? Test Your Skills 23 1. Val computed the following revenue and expense figures: Key Terms and Concepts The following are terms and concepts discussed in the chapter that are important for you as a manager.
Su Chan manages a Chinese restaurant called the Bungalow. The owner sug- gests that April revenues and costs should be as follows: Labor and other expenses remain constant. By how much? Using these numbers. She proposes a compromise and tells the owner that if he will agree to increased labor costs.
Since it is the midpoint of her school year. She feeds approximately 1. Of course. How do changes in revenue affect his performance? Pamela Cantu operates a school foodservice department in a small. The dining room at the Roadrock Inn is extremely popular. Su thinks it might be too difficult and not so good for her guests to increase sales without also increasing labor costs. Terry Ray. Su proposes the following: Which set of projections has more reasonable goals?
If you use the Excel spreadsheets on your student disk. These funds are available. Her budget. Sam Guild operates a dining room reserved for doctors in a large hos- pital in the Northeast. If not. If it is increased? Knowledge of these techniques is critical if you are to ana- lyze sales trends in the facility you manage and be prepared to serve your future guests well. Importance of Forecasting Sales The first question operating managers must ask themselves is very simple: This week?
This year? This includes the total revenue you will generate. It is very likely that Tonya will be involved in serving both cash guests public cafeteria and noncash patients tray line. In its simplest case. In many areas of the hospitality industry. Simply put. In the hospitality industry. Consider Manuel. Consider Tonya Brown. Forecasts of future sales are normally based on your sales history since what has happened in the past in your operation is usually the best predictor of what will happen in the future.
It is important to remember that a distinction is made in the hospi- tality industry between sales revenue and sales volume. The time period may be an hour. When you predict the number of guests you will serve and the revenues they will generate in a given future time period. With this information. When used in this manner. This is critical information because.
You can determine your actual sales for a current time period by using a computerized system called a point of sales POS system that has been designed to provide specific sales information. An understanding of anticipated sales.
Improved ability to maintain proper levels of nonperishable food inventories 7. Improved ability to predict expenses 3. Greater efficiency in scheduling needed workers 4. Improved budgeting ability 8. In this way. Sales History A sales history is the systematic recording of all sales achieved during a predetermined time period. Increased profit levels and stockholder value Clearly. In addition to the importance of ac- curate sales records for downloading and staffing.
Figure 2. If an individual server can serve 25 guests at lunch. Before you can develop a sales history. If management keeps no accurate sales histories or forecasts. Better accuracy in downloading the correct amount of food for immediate use 6.
It is no less than an accurate record of what your operation has sold. Lower selling prices for guests because of increased operational efficiencies 9. Increased dollars available for current facility maintenance and future growth Greater efficiency in scheduling menu item production schedules 5. With accurate sales records. Accurate revenue estimates 2. Notice that. You would then transfer that number. Sales to date on Tuesday.
The simplest type of sales history records revenue only. Common alternatives are meal periods. January 2. The sales history format shown in Figure 2. The reason is obvious. In that way. This approach is often used in such settings as extended care facilities. Fewer service personnel are needed from 9: It is simply easier to manage well when you know the answer to the question.
Notice also that you might decide not to produce as many menu items for con- sumption during the 9: Sales History 31 Sometimes. Given the data in Figure 2. Fewer campers eat between 9: To illustrate.
Computing Averages for Sales Histories In some cases. This is because it may be helpful to know. Rolling average Fixed Average A fixed average is an average in which you determine a specific time period. The number of items in the series is three. Fixed average 2.
Note that this average is called fixed because the first 14 days of the month will always consist of the same days and. Rolling Average The rolling average is the average amount of sales or volume over a changing time period. An average is defined as the value arrived at by adding the quanti- ties in a series and dividing the sum of the quantities by the number of items in the series.
Since future guest activity can often be expected to be very similar to the activities of guests in the past. The two major types of averages you are likely to encounter as a foodservice manager are as follows: It is important.
Ubalda would add her daily revenue to that of the prior seven-day total and drop the day that is now eight days past. This means that she will. Using the sales data recorded in Figure 2.
This gives her the effect of continually rolling. Each day. Ubalda is interested in knowing what the average revenue dol- lars were in her operation for each prior seven-day period. Note that each seven-day period is made up of a group of daily rev- enue numbers that changes over time. It is important to note that Ubalda could have been interested in her average daily revenue last week fixed average.
You may choose to compute fixed averages for some time periods and rolling averages for others. As previously mentioned. Regardless of the type of average you feel is best for your operation. The use of the rolling average. This is true because. Recording Revenue. Guest Counts. For them. Average sales per guest is determined by the following formula: Not surprisingly.
Average sales per guest Most POS systems are programmed to tell you the amount of revenue you have generated in a selected time period. For many other foodservice operations.
If the operation you manage does not have a POS system in place. Guests served 3. Sales 2. It is important to under- stand that this would not be correct. To demonstrate further. From the data in Figure 2. On Tuesday. Sales History 37 used. To compute the two-day revenue average. If each unit served 1. January 1. Ob- viously. This allows you to have a good sense of what has hap-. The important con- cept to remember is that you have the power to determine the information that best suits your operation.
That information should be updated at least daily. Because that information is so important to predicting future sales levels. Sales Variances Once an accurate sales history system has been established. These sales variances. If you find yourself in such a situation. Sales Variances 39 pened to your business in the recent past. An alternative. Simply knowing the dollar value of a variance has limitations. Percentage variance is obtained by subtracting sales last year from sales this year and dividing the resulting number by sales last year.
While the format used in Figure 2. Consider two restaurant managers. All three months in the first quarter of the year showed revenue increases over the prior year. In January. The first question Erica must address is the amount her sales have actually increased. She may have raised the price of pizza. Predicting Future Sales It has been pointed out that truly outstanding managers have an ability to see the future in regard to the revenue figures they can achieve and the number of guests they expect to serve.
As can easily be seen. Or perhaps a competing pizza parlor was closed for renovation during this time period. She records the revenue dollars she achieves on a daily basis.
Return to our previous example of the two restaurant managers. We examine the procedures for all three of these in detail. Depending on the type of facil- ity you manage. Using all of her knowledge of her own operation and her market. Using the first per- centage variance formula presented before. The overall quarter average of 7. Erica would like to predict the sales level she will experience in the first three months of next year.
She may have increased the size of pizzas and held her prices constant. Erica may have extended her hours of operation to at- tract more students. Erica has done a good job in maintaining sales histories in the two years she has managed the Rock. As your level of expertise increases. Revenue data for the last three months of the year are recorded in Figure 2.
Her guests consist of college students. Revenue increases range from a low in October of 3. If Erica were to use the 7. She feels it is neither too conservative. If Erica were to use the 6. In the month of January. Future Guest Counts Using the same techniques employed in estimating increases in sales.
Erica will have a better idea of the sales dollars she may achieve than managers who did not have the advantage of sales histories to help guide their planning. Notice that in January. If that is done.
The same formula is used to forecast average sales per guest as was used in forecasting total revenue and guest counts. Future Average Sales per Guest Recall that average sales per guest check average is simply the amount of money an average guest spends during a visit.
When added to your knowledge of the unique factors that impact your unit. They are easily developed and will serve as the cornerstone of other management systems you will design. Without accurate sales data. Your knowledge of potential price changes. There is no question. Could Pauline use sales histories to estimate the financial impact of serving additional diabetic meals in the future?
You have done your homework with regard to the number of individuals who may be coming and how much they are likely to spend. You want to be ready to provide them with quality food and bever- age products and enough staff to serve them properly.
Look up the following sites to see examples of point of sales POS systems used to record historical sales information. Since you can now answer those questions. She has developed a sales history for the first week of March using to- tal sales and guests served. Should she take this shortcut? Why or why not?
Help Laurie calculate her average sales per guest for each day of the week and calculate her totals. Would this shortcut make a difference in her total average sales per guest for the week? If so. Test Your Skills 49 Key Terms and Concepts The following are terms and concepts discussed in the chapter that are important for you as a manager.
She decides to use her six- month total percentage variance of 4. Peggy from the preceding exercise wants to use the sales and vari- ance information from her first six months of the year to forecast her revenues for the last six months of the year.
Calculate her sales variances and percentage variances for the first six months of the year. She has maintained a sales history for January through June.
Help her calculate the projected sales increases and revenue forecasts for the last six months of the year. Use the SUM function for the total. Spreadsheet hint: The Lopez brothers. Victor is in charge of marketing.
Because of his marketing efforts. Using the weighted check average calculated in part a. Test Your Skills 51 4. Victor is not aware of any antic- ipated menu price increases and assumes. Help Donna more easily plan for the number of breakfasts she will serve by completing the following chart: Donna knows that as the number of rooms sold in the hotel in- creases. Based on historical records. Donna Berger is a hotel food and beverage director at a room ho- tel. Menu Item Forecasting When they get hungry.
It teaches the formu- las used to compute the true cost of the food you provide your guests. Consider the situation you would encounter if you used sales histories Chapter 2 to project guests for lunch today at the restaurant you manage.
This is good news for your career as a hospitality manager. The question you would face is this. The answer to the question of how many servings of roast chicken. All this growth. Once you know the average number of people selecting a given menu item.
Let us return to the example cited previously. Producing too much of any one item would. An estimate of guests for next Monday makes sense because the weekly sales total last week of 1. You also know that. If you as-. The right amount would be the number of servings that minimize your chances of running out of an item before lunch is over. While you would never run out of any one item. What you would like to do.
If we know. The basic formula for individual menu item forecasting. Figure 3. Simi- larly. Your own promotions 6. In our example. Operational consistency These. Weather 3. They are not able to estimate precisely the number of guests who may arrive on any given day. Special events in your area 4. Quality of service 8. Once you know what your guests are likely to select. It is important to note that foodservice managers face a great deal of uncertainty when attempting to estimate the number of guests who will arrive on a given day because a variety of factors influ- ence that number.
Sales histories. Among these are the following: Competition 2.
Facility occupancy hospitals. A standardized recipe consists of the pro- cedures to be used in preparing and serving each of your menu items. The standardized recipe ensures that each time a guest orders an item from your menu. It will make little difference to the unhappy guest. Total yield number of servings 3. In Chapter 2. Ingredient list 5. Portion size 4. Cooking time and temperature 7.
If the recipe cost is not included in the standard- ized recipe. Critical factors in a standardized recipe. If this stan- dardized recipe represents the quality and quantity management wishes its guests to have and if it is followed carefully each time. Standardized Recipes While it is the menu that determines what is to be sold and at what price.
Inconsistency is the enemy of any quality foodservice operation. Forecasting can involve estimating the number of guests you expect. This forecasting is crucial if you are to effectively manage your food expenses. Good standardized recipes contain the following information: The standardized recipe helps you make sure that they do.
Special instructions. Menu item name 2. Guests expect to get what they pay for. Standardized Recipes 59 tuations in your predicted number to be sold computations when plan- ning how many of each menu item you should prepare.
We tried them but lost some. Butter melted 1 lb. Wash chicken. Clarify butter. Step 2. They take too long to use. My chef refuses to reveal his or her secrets.
Portion Cost: See cost sheet Serve on in. Ingredients Amount Method Chicken Quarters 48 ea. Serve with Recipe Yield: They take too long to write up.
The excuses used are many. They are too hard to read. Step 1. As a general rule. Standardized Recipes 61 Of the preceding arguments.
The process can sometimes be com- plicated. The computerization of a foodservice operation is impossible unless the elements of standardized recipes are in place. Accurate downloading is impossible without the existence and use of standardized recipes. It is hardly manage- ment at all. Some op- erators like to weigh all ingredients. Matching food used to cash sales is impossible to do without standardized recipes. For liquid items. Computer software designed for that purpose is now on the market see Chapter Jump to Page.
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Total 10 lb. Download pdf. Louis Community College. Overviews make it easy for readers to see what the chapter is about and what they will learn by read- ing it.
For example, 3 pounds of canned corn will not yield the same num- ber of 3-ounce servings as 3 pounds of fresh ear corn.