Chapter 3 Cost Control Copyright 2011 by the
Chapter 3 Cost Control © Copyright 2011 by the National Restaurant Association Educational Foundation (NRAEF) and published by Pearson Education, Inc. All rights reserved.
Cost Control Overview Cost control is a business’s efforts to ………………………… § Every business needs to make ________ than it ______ in order to survive. § Its sales, or _____, have to be higher than its costs. § Revenue is the income from ………………………………. § _______ is the price an operation pays out in the purchasing and preparation of its products or the providing of its service. 3. 1 Chapter 3 | Cost Control 2
Types of Costs § A successful restaurant or foodservice operation needs to manage and control many costs. § Four main categories of costs: § 1. § 2. § 3. § 4. 3. 1 Chapter 3 | Cost Control 3
Costs cont. § ______ costs can change based on sales § Variable: go up and down as sales go __________in direct proportion; ex. ______ cost (more business, buy more food inventory) § Semivariable: go up and down as sales go up and down in ______ proportion; labor costs (less business, must pay _______ but can have less waiters) § the operation has a certain amount of _______ in how much it spends on these aspects of the operation. 4
Costs cont. § Non-controllable/fixed costs: needs to be paid ___________________ § overhead costs = __________________ § do not change based on the operation’s ______. 5
Operating Budgets An ________is a financial plan for a specific period of time (usually ____) § _________ is a prediction of sales levels or costs that will occur during a specific time period. § Steps of forecasting § Analyze ______: what items were popular at what time § Account for externalities: ____________ § Predict sales ______: How busy will certain days be? § Predict sales ______: how will each menu item sell Most forecasting techniques rely on having accurate __________________ 3. 1 Chapter 3 | Cost Control 6
Forecasting cont. § The most common foodservice revenue forecasting techniques are based on the number of ______and average _________ § A sales history is a record of the number of ___________________ § Most operations can run historical sales and production reports from their _____________ systems. 7
Profit-and-Loss Report A profit-and-loss report (P&L) is ______________________ P&L is also known as an __________p. 157 § P&L report shows whether an operation has ____money during the time period covered by the report. § P&L helps management determine areas where __________ must be made to bring business operations in line with established financial goals. § For an operation to be profitable, sales must exceed _____. § ________is listed on bottom of P&L statement 3. 1 Chapter 3 | Cost Control 8
Cost-Control Tools § Cost control measures: § ______ menu items (food costs) § ____________(labor costs) § Full-line supplier co. : one-stop shops that __________________ 3. 1 Chapter 3 | Cost Control 9
Steps in Controlling Food Costs Food costs must be controlled during all seven stages of the food flow process: 1. 2. 3. 4. 5. 6. 7. 3. 2 Chapter 3 | Cost Control 10
Determining Food Cost ________: actual dollar value of the food used by an operation during a certain period (sold, given away, wasted, spoiled, overportioned, etc. ) § ______: dollar value of a food product in storage and can be expressed in terms of units, values, or both: § _______ inventory is the physical inventory at the beginning of a given period. § The __________ inventory is the inventory at the end of a given period. § food cost formula: 3. 2 Chapter 3 | Cost Control 11
Determining Food Cost Percentage Total food cost percentage is the relationship between _____ and the _____ of food to achieve those sales. § Food cost % formula § Food cost is a ______ cost: It should _____ or ______ in direct proportion to an increase or decrease in sales 3. 2 Chapter 3 | Cost Control 12
Establishing Standard Portion Costs § Most every operation has ________ recipes that are followed every time a menu item is prepared. § For every standardized recipe, an operation should establish a ____________, which is the exact amount that one serving, or portion, of a food item should cost when prepared according to the item’s standardized recipe. § A ____________is a tool used to calculate the standard portion cost for a menu item (p. 169) § As with the standardized recipe, a recipe cost card should exist for _______________________ 3. 2 Chapter 3 | Cost Control 13
As-purchased versus Edible-portion Costs § The _____________is used to cost an ingredient at the purchase price before any trim or waste is taken into account. (p. 171) § The ______________is used to cost an ingredient after trimming and removing waste, so that only the usable portion of the item is reflected. 3. 2 Chapter 3 | Cost Control 14
Recipe Yields A ______is the process of determining the number of portions that a recipe produces. § To convert a recipe, use the formula: § When determining yield, take into account for _________ loss of meats and some vegetables (greens) 3. 2 Chapter 3 | Cost Control 15
Controlling Portion Sizes § Controlling ______ is very important for a restaurant to meet its standard food cost. § Tools that are essential for accurate portion control include: § 1. § 2. § 3. § 4. § Another mechanism for ensuring that portions are the right size is to _____any item that can be preportioned before serving. 3. 2 Chapter 3 | Cost Control 16
Monitoring Production Volume and Cost § When restaurants produce too much, food cost goes ___; produce too little, and sales are lost. § A food production chart shows how much product should be ______by the kitchen during a given meal period. § A well-structured chart can ensure product quality, avoid product _______, and minimize ____ § _______is critical in helping management forecast how many portions of each menu item to produce on a given day. § p. 177 3. 2 Chapter 3 | Cost Control 17
Menu Pricing § The _______ is the primary sales tool in most restaurant § There a number of methods for menu pricing: (p. 178) § A contribution margin is the portion of dollars that a __________________ 1. ______________, an operation must know the portion costs for each item sold. 2. ________pricing method, multiply raw food costs by a predetermined fraction. 3. _________method, the total revenue is divided by the number of seats, average seat turnover, and days open in one year. 4. _______percentage is equal to the food cost divided by food sales. 3. 2 Chapter 3 | Cost Control 18
Budgeting Labor Costs § Labor is a semivariable, controllable cost. Labor costs are tied to ___________ § Most operations have both __________________ § Operations must be aware of the fluctuations in their sales so as to have just the right amount of ______ on hand to handle customers efficiently 3. 3 Chapter 3 | Cost Control 19
Labor Cost Factors § __________: amount of sales an operation is doing for a given time period, impacts labor costs. § ___________: the number of employees hired to fill one position in a year’s time. § ___________: specifications of the operation with regard to products and service (employee skills will need to be higher in fine dining vs. quick service) § A restaurant or foodservice operation must meet ________ standards. If an employee does not prepare a product that meets the operation’s standards, the item must be redone. This costs money, in terms of wasted product and lost productivity (overcooked steaks, burnt fries) 3. 3 Chapter 3 | Cost Control 20
Scheduling § A _________: shows the number of people needed in each position to run the restaurant or foodservice operation for a given time period. P. 190 § To make the best estimates for a master schedule, it also needs to consider current ___________ § A ___________is a chart that shows employees’ names and the days and times they are to work. P. 191 § A contingency plan helps an operation remain efficient and productive even during _____________________ § 1. § 2. 3. 3 Chapter 3 | Cost Control 21
Quality Standards for Purchasing and Receiving § Purchasing: choose a _______ § Receiving: receive only when operation is slow Meat: ________ Dairy: ________ Fish: fresh, _______; frozen fish, _____ § When receiving: § 1. § 2. Have a copy of _______on hand § 3. Check delivery against both __________________ 22 3. 4 Chapter 3 | Cost Control __
Quality Standards for Storing § Monitor _____ food daily to preserve its quality. § Rotate all products in storage following the _________________ § Check storage facilities: § Dry storage ______ § Refrigerator: _______ § Freezer: ________ 3. 4 Chapter 3 | Cost Control 23
Quality Standards for Food Production and Service § Standard-_____ sizes, _______recipes, and standard-portion ______ are all food-production standards. § Managers should _____ each item to be sure that it meets quality standards 3. 4 Chapter 3 | Cost Control 24
Quality Standards for Inventory § __________means counting and recording the number of each item in the storeroom. § Closely monitor ________ to ensure that products are ordered as they are needed. § Carefully monitoring inventory also helps ensure that no product goes to _____. Minimizing waste keeps costs _____ and sales ____. § _____% of all inventory shortages are due to employee theft 3. 4 Chapter 3 | Cost Control 25
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