FOOD AND BEVERAGE COST CONTROL

—CHAPTER 1

—COST AND SALES CONCEPTS

—DHM

—INTRODUCTION

—Learning Objectives

—Cost Concepts

—Industry-wide Variations in Cost

—Sales Concept

—Monetary Terms

—Average Sale

—This average is determined as follows:

Average check  = Total dollar sales  ÷ Total number of covers

Total sales of $3,902.30 and 140 covers. Thus,

Average sale  = $3,902.30 ÷  140 = $27.87

—Yasser, one of the servers, had 30 customers and total dollar sale of $565 on the Saturday night of February 13, average sale per server for Jim would be calculated as follows:

Average sale = Total sales for Yasser ÷ No. of customers for Yasser

                   = $565 ÷ 30

                   = $18.83

—Non-Monetary Terms

—Non-Monetary Terms

—The Cost-to-Sales Ratio

—TUTORIAL

—CHAPTER 2

—THE CONTROL PROCESS

—DHM

—The Control Process

—Managing Income & Expenses

—The Control Process

—The Control Techniques

3. Training

  Training is a process by which managers teach   employees how work is to be done, given the standards   and standards procedures established.

Example;

  if management has established a standard 4 – ounce portion size for hamburgers, then all employees responsible for producing portions of hamburgers must be made aware that 4 ounces is the correct portion size.

—The Control Techniques

—PREPARING AN OPERATING BUDGET

—The Control Process

—TUTORIALS

—CHAPTER 3

—COST/ VOLUME/PROFIT RELATIONSHIP

—DHM

—Cost/Volume/Profit Relationship

—FIXED AND VARIABLE COST

—S=VC+FC+P

—S=VC+FC+P

—Variable Rate & Contribution Rate

—Breakeven Point

—Calculate CVP

—Calculate Breakeven Point

—Breakeven Analysis

—Contribution Margin

—Cost/Volume/Profit Analysis

—CVP Analysis

—Dollar Formulas & Calculation

—NUMBER OF CUSTOMER TO BREAK EVEN

—the total of the contribution margins for all sales is used to cover fixed costs and provide a profit. If one knows the average contribution margin per sale and the dollar figure for fixed costs, it is then possible to calculate the number of sales, or customers, needed to cover fixed costs and the desired profit.

—For example, if the financial records of a small restaurant indicated

—sales of $48,000 and variable costs of $18,000 in a period when 3,000 customers were served, then:

 48,000 sales ÷ 3,000 customers = $ 16.00 average sales

18,000 variable costs ÷ 3,000 customers = $ 6.00 average variable costs

—determine average contribution margin

Average S $16.00 – Average VC  6.00

 = Average CM $10.00

—BEP in Customers =  FC ÷ Average CM

—to determine the number of customers required to achieve a given profit, one simply adds profit to fixed cost and divides by average contribution margin.

—  Number of Customers =  FC + Profit ÷ Average CM

—Assume that fixed cost for the period was $30,000

Number of Customers =  $30,000  ÷  $10

    3,000 customers

1. Given the following information, determine total dollar sales:

2. Cost of sales, $46,500; cost of labor, $33,247; cost of overhead, $75,883; profit, $3,129.

3. Cost of sales, $51,259; cost of labor, $77,351; cost of overhead, $42,248; loss, $41,167.

4. Given the following information, find contribution margin:

5. Average sales price per unit, $13.22; average variable cost per unit, $5.78

6. Average sales price per unit, $14.50; average variable rate, .36

7. Average sales price per unit, $16.20; average contribution rate, .55

3. Given the following information, find variable rate:

4. Sales price per unit, $19.25; variable cost per unit, $6.70

5. Total sales, $164,328; total variable cost, $72,304.32

6. Sales price per unit, $18.80; contribution margin, $10.72

7. Sales price per unit, $16.37; total fixed costs, $142,408; total unit sales, 19,364; total profit, $22,952.80

8. Given the following information, find contribution rate:

9. Sales price per unit, $18.50; contribution margin, $10.08

10. Sales price per unit, $17.50; variable cost per unit, $6.95

11. Total sales, $64,726; total variable cost, $40,130.12

5. Given the following information, find break – even point in Number of Customers:

6. Fixed costs, $113,231.64; contribution margin, $2.28

7. Sales price per unit, $17.22; fixed costs, $215,035.68; variable cost per unit, $6.98.

8. Given the following information, find number of customers:

9. Fixed costs, $58,922; profit, $9,838; contribution margin per unit, $3.82

10. Variable cost per unit, $5.30; profit equal to 18 percent of $211,000; sales price per unit, $16.30; fixed costs, $86,609

a)What is the establishment’s profit or loss if sales are RM595500?

b)Calculate the variable rate?

c)Calculate the contribution rate?

d)Calculate the breakeven point in dollar sales

e)What level of dollar sales is required  in order to earn a profit of RM75000

f)If the establishment operated at a loss of RM33375 last year, what was its level of dollar sales?

—CHAPTER 4

—FOOD PURCHASING AND RECEIVING  CONTROL

—DHM

—Food Purchasing Control

—Developing Standards & Standard Procedures

—Establishing Quantity Standard

—Periodic order method

—A method for ordering food or beverages based on fixed order dates and variable order quantities. The calculation of the amount of each item to order is comparatively

  simple:

  Amount required for the upcoming period

   -Amount presently on hand

  + Amount wanted on hand at the end of the period to last until the next delivery

 =Amount to order

—Periodic order method

orders for non perishables are placed every two weeks, one of the items ordered is crushed tomatoes, purchased in cans, packed 6 cans to a case. The item is used at the rate of 7 cans per week, and delivery normally takes five days from the date an order is placed. If the steward in this establishment found 9 cans on the shelf, anticipated a use of 14 cans during the upcoming period of approximately two weeks, and wanted 10 cans on hand at the end of that period, the calculation would be:

  14 cans required

   – 9 cans on hand

   +10 cans to be left at the end of the period        (desired ending inventory)

   = 15 cans to be ordered on this date

—Both delivery time and daily usage for the period must be used to determine the DEI. Furthermore, it is advisable to include some additional quantity to serve as a safety factor, just in case the normal delivery is delayed or business volume is higher than expected in the coming period. For the example given, the calculations for DEI would be as follows:

—Daily usage X Number of days in delivery period = Normal usage

—Normal usage + Safety factor (50%) =DEI

—14 cans per week  ÷ 7 days = 2 cans per day

—2 cans per day X 5 days in delivery period = 10 cans normal usage

—10 cans normal usage + 50% safety factor =15 cans DEI

—This is known as the Reorder Point in the Perpetual Order Method

—Establishing Quantity Standard

—Establishing Quantity Standard

—Reorder point is calculated in the following manner. If normal usage is 14 cans per week and it takes five days from date of order to get delivery, then the basic number of cans needed is 10. However, because delivery may be delayed, because usage may increase for unforeseen reasons, or because both of those possibilities may occur at once, it is advisable to increase that amount somewhat.

—The amount of the increase is a matter for management to decide.  For our purposes, we will use 50 percent for all calculations. If that were so in this case, the reorder point would be set at 15 cans. Under the periodic method, the DEI would similarly be calculated as 15 cans.

    Par stock   20

   -Reorder point   15

      =Subtotal   5

      +Normal usage until delivery   10

      =Reorder quantity   15

—Establishing standard for Price

—Centralized Purchasing

—Food Receiving Control

—Establishing standard for receiving

—Establishing Standard Procedures for receiving

—Establishing Standard Procedures for receiving

—Sample of a Invoice Stamp

—Listing Invoices on Receiving Clerk’s Daily Report

—Receiving Clerk’s Daily Report

—TUTORIALS

1. List 10 items considered perishable and 10 considered nonperishable in the foodservice industry.

2. Nestor ’ s Restaurant uses the periodic order method, placing orders

  every two weeks. Determine the quantity of canned peaches to order

  today, given the following:

1. Normal usage is one case of 24 cans per week.

2. Quantity on hand is 10 cans.

3. Desired ending inventory is 16 cans.

4. Harvey ’ s Restaurant uses the periodic order method, ordering once a month. Determine the proper quantity of tomato juice to order today,

  given the following:

1. Normal usage is one case of 12 cans per week.

2. Quantity on hand is 6 cans.

3. Desired ending inventory is 18 cans.

4. The coming month is expected to be very busy, requiring 50 percent more tomato juice than normal.

4. The Midtown Restaurant uses the perpetual order method. One of the

items to be ordered is canned pears. Determine reorder point and reorder

quantity, given the following:

1. Normal usage is 21 cans per week.

2. It takes four days to get delivery of the item.

3. Par stock is set at 42 cans.

4. Cans come packed 12 to a case.

5. The Last Chance Restaurant uses the perpetual order method. One of

the items in the inventory is canned green beans. Determine reorder

point and reorder quantity, given the following:

1. Normal usage is two cans per day.

2. It takes five days to get delivery of the item.

3. Par stock is 29 cans.

4. Cans come packed six to a case.

—CHAPTER 5

— FOOD STORING & ISSUING CONTROL

—DHM

—Food Storing & Issuing Control

STORING CONTROL:

ESTABLISHING STANDARDS AND STANDARD PROCEDURES FOR STORING

In general, the standard established for storing food should address five principal concerns:

1.Condition of facilities and equipment

2.Arrangement of Food

3.Security of Storage areas

4.Location of Storage Facilities

5.Dating and pricing of stored food

—Factor 1. Condition of facilities and equipment

The factor that involves in maintaining proper internal conditions include:

—Temperature (Key factors in storing food especially for perishable item)

—Food life can be maximized when food is stored at the correct temperature and at the proper level of humidity.

Fresh meats: 34 – 36 ° F (1-2 °C)

Fresh produce: 34 – 36 ° F (1-2 °C)

Fresh dairy products: 34 – 36 ° F (1-2 °C)

Fresh fish: 30 – 34 ° F (-1 to 1°C)

Frozen foods:  10 – 0 ° F (-23 to -18°C)

—Factor 1. Condition of facilities and equipment

—Storage Container (Appropriate container especially for staple food, fresh food and cooked or processed food)

—Shelving (Shelving should be slatted to permit maximum air circulation for perishable material and solid steel shelving for non-perishable, and raised a few inches above the floor level)

—Cleanliness (Absolute cleanliness)

—Factor 2: Arrangement of Foods

—Factors involved in maintaining appropriate internal arrangement of food include:

1.Keeping the Most-Used item readily available. (Kept most used item closest to the entrance tend to reduce the time required to move needed foods from storage to production and thus tends to reduce labor costs.)

2.Fixing definite location

  (Each particular item should always be found in the same location, and attention should be given to ensuring that new deliveries of the item are stored in the same location.)

3. Rotation of Stock (FIFO system)

  (storing new deliveries of an item behind the quantities already on hand, thus ensuring that older items will be used first. This reduces the possibilities for spoilage.)

—Factor 3: Location of Storage Facilities

—the storage facilities for both perishable and nonperishable foods should be located between receiving areas and preparation areas, preferably close to both. A properly located storage facility will have four effects:

1. Speeding the storing and issuing of food

2. Maximizing security

3. Reducing labor requirements

4. Minimizing infestation of rodents and other unwanted creatures

—Factor 4: Security

—Food should never be stored in a manner that permits pilferage. That is another reason for moving foods from the receiving area to storage as quickly as possible.

—Employees should not be permitted to remove items at will. Typically, a storeroom is kept open at specified times for specified periods well known to the staff and is otherwise closed to enable the storeroom clerk to attend to other duties.

—When the storeroom is closed, it should be locked, and the single key should be in the storeroom clerk ’s possession. In such cases, one additional emergency backup key is usually kept by the manager or in the office safe.

—Factor 5: Dating and Pricing

—It is desirable to date items as they are put away on shelves, so that the storeroom clerk can be certain of the age of all items and make provisions for their use before they can spoil.

—all items should be priced as goods are put away, with the cost of each package clearly marked on the package. Following this procedure will greatly simplify issuing, because the storeroom clerk will be able to price requisitions with little difficulty.

—Food Storing & Issuing Control

ISSUING CONTROL:

ESTABLISHING STANDARDS AND STANDARD PROCEDURES FOR ISSUING

There are two elements in the issuing process:

(1) The physical movement of foods from storage facilities to food preparation areas

  Physical Movement of Food from storage facilities is the movement of food from the storage facilities to the preparation area. Practices for doing this varies from one establishment to other establishment due to the management policies and procedures and priority

—Issuing Control: Establishing Standard and Standard Procedure for Issuing

(2) The record keeping associated with determining the cost of the food issued.

  DIRECT

  Direct are charge to food cost as they are received directly on assumption that these perishable item have been purchased for immediate use. Figures in “FOOD DIRECT” column in Receiving Clerk’s Daily Report will be calculated directly into the particular day food cost.

—Issuing Control: Establishing Standard and Standard Procedure for Issuing

(2) The record keeping associated with determining the cost of the food issued.

  STORES

  The food category known as stores was previously described as consisting of staples. When purchased, these foods are considered part of inventory until issued for use and are not included in cost figures until they are issued. Therefore, it follows that records of issues must be kept in order to determine the cost of stores. For control purposes, a system must be established to ensure that no stores are issued unless kitchen personnel submit lists of the items and quantities needed.

—Issuing Control: Establishing Standard and Standard Procedure for Issuing

(2) The record keeping associated with determining the cost of the food issued.

  The Requisition is a form filled in by a member of the kitchen staff. It lists the items and quantities of stores that the kitchen staff needs for the current day ’ s production. Each

  requisition should be reviewed by the chef, who should check to see that all required items are listed and that the quantity listed for each is accurate. If the list of items and quantities is correct, the chef signs and thus approves the requisition.

—Food & Beverage Transfer

—F&B Transfer means the transfer of item intended for a section to another section that requires it.

—Intra-unit Transfer

   are food and beverage transfers between departments of a food and beverage operation. They include transfers of food and liquor between the kitchen and bar, and between kitchen and kitchen in those larger operations that have multiple feeding facilities.

Between Bar and Kitchen

  Many kitchens use beverage items such as wine, cordials, brandy, and even ale to produce sauces, parfaits, certain baked items, and rarebits. Occasionally, these beverages are purchased by the food department for use in the kitchen, kept in a storeroom until needed, and then issued on requisitions directly to the kitchen

—Food & Beverage Transfer

—Inter-unit Transfer are transfers of food and beverage between units in a chain. The two examples that follow illustrate inter unit transfers and the effect of such transfers on food costs. In some instances, small chains produce some items (e.g., baked goods) in only one unit and then distribute those items to other units in the chain. If the ingredients for the baked goods come from that particular unit ’ s regular supplies, then some record must be made of the cost of the ingredients used.

—CHAPTER 7

— FOOD PRODUCTION CONTROL

—I. PORTIONS

—DHM

—Food Production Control I. Portions

—The standards and standard procedures for production control are designed to ensure that all portions of any given item conform to management ’ s plans for that item and that, as far as possible, each portion of any given item is identical to all other portions of the same item.

—Portion for any given menu should be identical in 4 respect.

1.Ingredients

2.Proportions of ingredients

3.Production methods

4.Quantity

—To achieved the 4 respected areas we need to have

1.Standard Portion Size

2.Standard Recipe

3.Standard Portion Cost

—Standard Portion Size

—One of the most important standards that any foodservice operation must establish is the standard portion size , defined as the quantity of any item that is to be served each time that item is ordered. In effect, the standard portion size for any item is the fixed quantity of a given menu item that management intends to give each customer in return for the fixed selling price identified in the menu. It is possible and desirable for management to establish these fixed quantities in very clear terms. Every item on a menu can be quantified in one of three ways: by weight, by volume, or by count.

—Every item on a menu can be quantified in one of the three way:

—By Weight

  Can be expresses in ounce or grams used to measure portion sizes for a number of menu items.

—By Volume

  Is used as the measure for portion of many menu items usually that of liquid in nature, Milk, soup, juices of coffees

—By Count

  Used to identify portion size, such as sausage, eggs and shrimps

—Standard Portion Size

—Many devices are available to help foodservice operators standardize portion sizes. Among the more common are the aforementioned scoops and slotted spoons, as well as ladles, portion scales, and measuring cups. Even the number scale or dial on a slicing machine, designed to regulate the thickness of slices, can aid in standardizing portion size: A manager may stipulate a particular number of slices of an item on a sandwich and then direct that the item be sliced with the dial at a particular setting

—Advantages for practicing Standard Portion Size

—It helps reduce customer discontent as the customer cannot compare his or her portion unfavorably with that of other customer and feel dissatisfied or cheated.

—It help to eliminate animosity of miscommunication between the kitchen staff and the server over the portion size that lead to delay in the serving of food.

—It help to eliminate excessive costs of over portioned menu.

—Price on the menu is usually fixed, thus it will also reflect the portion size of the menu. If the portion size is constantly change then it will dissatisfied the customer and server.

—Standard Recipe

—Another important production standard is the recipe. A recipe is a list of the ingredients and the quantities of those ingredients needed to produce a particular item, along with a procedure or method to follow. A standard recipe is the recipe that has been designated the correct one to use in a given establishment.

—Standard recipes help to ensure that the quality of any item will be the same each time the item is produced. They also help to establish consistency   of taste, appearance, and customer acceptance.

—the same ingredients are used in the correct proportions and the same procedure is followed, the results should be nearly identical each time the standard recipe is used, even if different people are doing the work. In addition, returning customers will be more likely to receive items of identical quality.

—Standard recipes are also very important to food control. Without standard recipes, costs cannot be controlled effectively. If a menu item is produced by different methods, with different ingredients, and in different proportions each time it is made, costs will be different each time any given quantity is produced

—Standard Portion Cost

—A standard portion cost can be calculated for every item on every menu, provided that the ingredients, proportions, production methods, and portion sizes have been standardized as previously discussed. In general, calculating standard portion cost merely requires that one determine the cost of each ingredient used to produce a quantity of a given menu item, add the costs of the individual ingredients to arrive at a total, and then divide the total by the number of portions produced.

—Standard portion cost is defined as the dollar amount that a standard portion should cost, given the standards and standard procedures for its production. The standard portion cost for a given menu item can be viewed as a budget for the production of one portion of that item. There are several reasons for determining standard portion costs. The most obvious is that one should have a reasonably clear idea of the cost of a menu item before establishing a menu sales price for that item

—CALCULATING STANDARD PORTION COSTS

—There are several methods for calculating standard portion costs:

1. Formula

  For many (perhaps even for a majority) of the menu items prepared in foodservice establishments, determining standard portion cost can be very simple. For a large number of items, one may determine portion cost by means of this formula:

Standard portion cost   =     Purchase price per unit

  Number of portions per unit

  For example, consider an establishment serving eggs on the breakfast

  menu, with two eggs as the standard portion. One can determine the standard cost of the portion of the eggs by dividing the cost of a 30 – dozen case of eggs — say, $ 41.40 — by the number of two – egg portions it contains (180) to find the standard portion cost of $ 0.23.

Standard portion cost   =  41.40 purchase price per case

   180 std. portion per case

  =  $0.23

—There are several methods for calculating standard portion costs:

2. Recipe detail and cost card

  For menu items produced from standard recipes, it is     possible to determine the standard cost of one portion by   using a form known as a recipe detail and cost card .

—There are several methods for calculating standard portion costs:

3. Butcher test

  When meat, fish, and poultry are purchased as wholesale cuts, the purchaser pays the same price for every pound of the item purchased, even though, after butchering, the resulting parts may have entirely different values. If, for example, a particular cut of beef is approximately half fat and half usable meat, the two parts clearly have different uses and different values, even though they were purchased at the same price per pound because both were part of one

  wholesale cut. Among other purposes, the butcher test is designed to establish a rational value for the primary part of the wholesale piece.

—There are several methods for calculating standard portion costs:

4. Cooking loss test

  The primary purpose for the cooking loss test is the same as that for the butcher test: determining standard portion cost. The cooking loss test is used for those items that cannot be portioned until after cooking is complete. With these items, one must take into account the weight loss that occurs during cooking. Therefore, one cannot determine the quantity remaining to be portioned until cooking is completed and portion able weight can be determined. Cooking loss varies with cooking time and temperature, and it must be taken into account in determining standard portion costs.

—Using the Yield Percentage

—Or yield factor is defined as the percent of a whole purchase unit of meat, poultry or fish that is available for portioning after any required in-house processing has been completed.

—Quantity = Number of portions X portion size (as a decimal)  /Yield percentage

—CHAPTER 7

— FOOD PRODUCTION CONTROL

—II. QUANTITIES

—DHM

—PROBLEMS

—Assume that control has been established over individual portions and will shift our focus to the number of portions produced for each item on a menu for a given day or meal. After all, if the cost of a portion of some item is controlled at, say, $ 4.50 per serving, and the establishment produces 100 portions but sells only 40, there will be 60 portions unsold. These may or may not be salable on another day. Even if they are salable, these portions are likely to be of lower quality than when they were first produced. It is also possible that they cannot be sold in their original form, but must be converted into some other item that will be sold at a lower sales price.  Sometimes, if none of these possibilities are feasible, it may be necessary to throw the food away. In any case, there is excessive cost — either the cost of the food or the cost of additional labor that would not have been required if the establishment had produced 40 portions rather than 100. Such excessive costs can be reduced or eliminated by applying the four – step control process to the problem of quantity production.

—Food Production Control II: Quantities

—Maintaining Sales History

—A sales history is a written record of the number of portions of each menu item sold every time that item appears on the menu. It is a summary of portion sales.

—the best decisions on the nature of the sales history are based on the need for information that can be used to improve operations. Unless the information is useful in leading to better control over costs, its maintenance cannot be justified.

—the basic information is incorporated into the sales history, it is necessary to understand the two methods used for recording customers ’selections: manual and electronic.

—Portion sales records

—Regardless of whether the portion sales records are stored manually or electronically, they are likely to be arranged in one of three ways:

1. By operating period, such as one week or month, so that all sales records for an entire operating period can be viewed together on one page, card or screen.

2. By day of the week , so that all sales records for a given day (e.g. Tuesday) for a period of several weeks can be compared.

—3. By entrée item, so that the degree of popularity of a given item can be seen over time.

—Popularity Index

—Popularity index is defined as the ratio of portion sales for a given menu item to total portion sales for all menu items

—The popularity index is calculated by dividing portion sales for a given item by the total portion sales for all menu items and then multiplying by 100 in order to convert to a percentage. The index may be calculated for any time period, even for a single meal. When calculated for a single meal, the index is usually referred to as the sales mix,

—Popularity index  =                           portion sales  X 100                                 Total portion sales for all menu items

  188       X100

  1937

— 0.09706 and 0.09706  100  9.706%

—Other Information in Sales Histories

—Sales histories often include provisions for recording additional relevant information — internal and external conditions that may shed light on sales data. One of the most common of these conditions is the weather. Most foodservice operators find that weather conditions have a noticeable impact on sales volume.

—Special events can decidedly influence sales and are often included in sales histories. The occurrence of a national holiday on a particular day or the presence of a particular convention group in a hotel can affect sales considerably.

—So can such varied conditions as faulty kitchen equipment, street construction in front of the restaurant, or a major sale at a nearby

—Forecasting Portion Sales

—Forecasting is a process by means of which managers use data and intuition to predict what is likely to occur in the future.

—It is a principal element in cost control as accurate prediction will make purchasing and production more accurate.

—Steps in forecasting are:

1.Gather sales volume for particular time (Sales History)

2.External factors affecting the sales

3.Predict anticipated volume

4.Anticipate the sales for each menu item (Popularity Index)

5.Acquire management’s consent.

—Determining Production Quantities

—A production sheet is a form on which one lists the names and quantities of all menu item that are to be prepared for a given date.

—It varies from one establishment to another.

—Usually submitted to the Chef as many days earlier as possible.

—Late adjustment can be made immediately before the forecasted date or the night before. Usually minor adjustment.

—Production Sheet

—Sale Forecast Vs Actual Sales

—Void Sheet

—Portion Inventory and Reconciliation

—This approach effectively requires that one follow a series of logical steps. First, each menu item should be listed on the form before kitchen production begins. Next, an inventory is taken of any portions left over from previous meals that may be used again. Reusing leftovers in this way is common in some establishments, but unacceptable in others.

—If leftovers are to be used, the number of portions on hand is deducted from the quantity scheduled for production, and only the difference is prepared. That number is written in the “ Portions Prepared ” column.

—Portion Inventory and Reconciliation

—CHAPTER 8

— MONITORING FOODSERVICE OPERATIONS I: MONTHLY INVENTORY AND MONTHLY FOOD COST

—DHM

—Introduction

—The monthly accounting procedures provides information that can be useful for assessing the various control procedures established for the operation.

—To make these determinations, it is necessary to take a number of steps aimed at measuring performance.

—The first step is the physical inventory

—Valuing the Physical Inventory

—There are at least five possible ways of assigning values to units of products in a physical inventory.

1.Actual Purchase Price Method

2.First-In First-Out Method (Latest Prices)

3.Weighted Average Purchase Price Method

4.Latest Purchase Price Method (Most Recent Price)

5.Last-In, First-Out Method (Earliest Prices)

—Monthly Food Cost Determination

  Opening Inventory

+ Purchases

= Total Available

 – Closing Inventory

= Cost of Food

Once the cost of food is known, food cost       percent can be determined using the formula identified in the earlier chapter.

—Adjustment of Cost of Food Issued

—Transfer

—Intra-Unit (Cooking Liquor/Food to Bar-Direct)

—Inter-Unit

—Grease Sales (Sales of Item Out to other buyers especially item such as fats or oil. Usually will be debited as Other Income – Salvage and Waste Sales)

—Steward Sales (Sales to employees may be done if permitted)

—Gratis To Bars (Light food to customer as gives away such as hors d’ oeuvres)

—Promotion Expenses (Entertainment Purposes)

—Determining Cost of Food Consumed

  Opening Inventory

+ Purchases

=Total Available for Sale

-Closing Inventory

=Cost of Food Issued

+ Cooking Liquor

+ Transfers from Other Units

-Food to Bar (Directs)

-Transfer to Other Units

-Grease Sales

-Steward Sales

-Gratis to Bars

-Promotion Expenses

= Cost of Food Consumed

—Additional Information to get proper Food Cost

—To get the proper Food Cost we also need to deduct the cost of employees’ meals from the cost of food consumed

—Cost of meals can be calculated in four ways

1.Cost of separate issues

2.Prescribed amount per meal per employee

3.Prescribed amount per period

4.Sales value multiplied by cost percent

—Determining Cost of Food Sold

Opening Inventory

+ Purchases

=Total Available for Sale

-Closing Inventory

=Cost of Food Issued

+ Cooking Liquor

+ Transfers from Other Units

-Food to Bar (Directs)

-Transfer to Other Units

-Grease Sales

-Steward Sales

-Gratis to Bars

-Promotion Expenses

= Cost of Food Consumed

-Cost of Employees’ Meal

= Cost of FOOD SOLD

—Inventory Turnover

—Excessive Stock can brought about

1.Excessive Food Cost due to the spoilage of food stored too long

2.Excessive amount of cash tied up in inventory

3.Excessive labor cost to receive and store foods

4.Excessive space required for storage

5.Unwarranted opportunity for theft

Total Inventory = Opening Inventory + Closing Inventory

Average Inventory =

Inventory Turnover =

—CHAPTER 8

— MONITORING FOODSERVICE OPERATIONS II: DAILY INVENTORY AND DAILY

— FOOD COST

—DHM

—Daily Food Cost

—The major problem of monthly food cost alone in the length of time between reports.

—It cannot reveal any problems promptly and corrective action also cannot be taken promptly

—To avoid this delay and to make more timely figures available on day-to-day operation basis, daily food cost calculation is required.

—This will help the management to identified any situation promptly and can act with the situation immediately without needing to wait until the end of the month. This may be too late already.

—Determining Daily Food Cost

Cost of direct (from the receiving clerk’s daily report)

+ Cost of store (from requisition and meat tags, depending on the procedures followed)

+ Adjustment that increase daily cost (transfers from bar to kitchen; transfers from other units)

– Adjustments that decrease daily cost (transfer from the kitchen to the bar; food to bar (directs); gratis to bar; Steward sales; grease sales; promotion expenses)

= Cost of food consumed

-Cost of employees meals

= Daily cost of food sold

—Daily Cumulative Cost Record

—Daily Report

—The main purpose of daily report are

1.Shows food costs, food sales and food cost % for any one specific day and for all the days to date in the period

2.Compares these figures to those for a similar period

—Report to Management

—Daily Food Cost Report

—CHAPTER 9

— MENU ENGINEERING

—DHM

—MENU ENGINEERING AND ANALYSIS

—A very useful technique for analyzing menu sales and providing helpful information for evaluating every item on the menu relative to its present contribution to bottom – line dollars

—It provides a means for monitoring the effectiveness of efforts to maximize gross revenue in a menu.

—

—Controlling Food Sales

—Sales control merely means revenue control, a collection of activities designed to ensure that each order placed by a customer result in appropriate revenue for the enterprise. It is the most important element in any enterprise but it is also one part of the sales control.

—There are three principles goals of sales control:

1.Optimizing number sales(to increase the number of sales volume)

2.Maximizing profit Pricing

3.Controlling revenue.(Proper control of the revenue received)

—CHAPTER 9

— CONTROLLING FOOD SALES

—DHM

—Controlling Food Sales

—Sales control merely means revenue control, a collection of activities designed to ensure that each order placed by a customer result in appropriate revenue for the enterprise. It is the most important element in any enterprise but it is also one part of the sales control.

—There are three principles goals of sales control:

1.Optimizing number sales(to increase the number of sales volume)

2.Maximizing profit Pricing

3.Controlling revenue.(Proper control of the revenue received)

—Optimizing Number of Sales

—The most productive efforts are made by those who understand the determinants of customer selection of restaurants. The following eight factors are the most important for most people:

1. Location

2. Menu item differentiation

3. Price acceptability

4. Lighting and decor

5. Portion sizes

6. Product quality

7. Service standards

8. Menu diversity

—Maximizing Profit

—There are two principal means for maximizing profits:

1.Pricing products properly

• Cost

• Price Sensitivity

• Pricing Policies

1.Matching Competitors’ price

2.Calculating desired contribution margins to portion cost percentage

3.Adding desired contribution margins to portion cost

—Maximizing Profit

2. 2. Selling those products effectively.

—The menu

—Layout and design

—Variety

—Item arrangement and location

—Descriptive language

—Kitchen personnel and equipment

—Sales Techniques

—Up-selling

—Menu knowledge

—Costumer service

—Controlling Revenue

—Establishing standards and standard procedures for revenue control

—Documenting Food Sales

1.Help servers remember the specifics of guests’ orders

2.Give itemized bills to guest

3.Maintain written records of portion sales to add to a sales history

4.Proven the accuracy of cashier works

5.Verify the accuracy of prices changed

6.Provide the record required for tax purposes

—Using Numbered Checks

(Padded / unpadded)

—Checking and Verifying Food Sales

—Recording Revenue

—Menu Analysis

—Result definition

—Star is a menu item that produce both high contribution margin and high volume. These are the item that foodservice operators prefers to sell when they can

—Dog is a menu item that produces a comparatively low contribution margin and accounts for relatively low volume. These are probably the least desirable item to have on the menu.

—Plowhorse is a menu item that produces a low contribution margin but accounts for relatively high volume. These items have broad appeal to customer, but contribution comparatively little profit per unit sold.

—Puzzle is a menu item that produces a high contribution margin but accounts for comparatively low sales volume.

—Menu Engineering & Analysis

—CHAPTER 10

—BEVERAGE PRODUCTION CONTROL

—DHM

—Beverage Production Control

• To ensure that all drinks are prepared accordingly to management’s specifications

• To guard against excessive costs that can develop in the production process

—Establishing Standards and Standard procedures for production

—Standard must be established for the:

ØQuantity of the ingredients used

ØProportion of the ingredients used

ØDrink sizes

—To have some reasonable assurance that a drink will meet expectations each time it is ordered.

—If drinks are served accordingly to the formula and in standard portion, then the cost for each portion to sales should be the same.

—Establishing Quantity Standard and Standard Procedures

1. 1. Devices for Measuring Standard Quantities

—Four measuring devices are commonly used by bartenders:

ØShot Glasses (Plain and lined)

ØJiggers (Double ended stainless steel Measuring device that resembles the shot glass)

ØThe pourer (Fitted on top of a bottle)

ØThe automated Dispenser (predetermined measures of liquor)

—Free pour from own judgment or eyesight

—Establishing Quantity Standard and Standard Procedures

2. Glassware

—Establishing Quality Standards and Standard Procedures

—Standard Recipes

—Establishing Standard Portion Cost

—Straight Drinks (formula)

—Mixed Drinks and Cocktails (Detail Recipe)

—Controlling Revenue

Possible control of problems

—Working with the cash drawer open

—Under-ringing sales

—Overcharging customer

—Undercharging customer

—Over pouring

—Under pouring

—Diluting bottle contents

—Bringing one’s own bottle into the bar

—Charging for drinks not served

—Drinking on the job

—Beverage Sales Monitoring

—The Cost Approach

Cost Percentage Methods

Monthly Calculation

Daily Cost Calculation

Cost Calculation by Category

Standard Cost Method (Actual – Standard Cost)

—The Liquid Measure Approach

ØOunce-Control Method (Quantity stock taking daily)

—The Sales Value Approach

Actual Sales Record (Recipe Detail Comparison)

Average Sales Value Method (Per-bottle value)

Standard Deviation Method (Statistical EDP)

—Inventory Turnover

—Monitoring Production Performance and Taking Corrective Action

—A manager can personally observe bar operations on a regular basis

—A designated employee, such as a head bartender, can observe others working at the bar and report unacceptable performance and problems to management

—Individual unknown to the bartenders can be hired to patronize the bar, observe the employees, not problems and report to management

—Closed-circuit television systems can be installed to permit observation of bartenders and bar operations from some remote location.

…