A STUDY ON COST CONTROL IN FOOD AND BEVERAGE SERVICE
WITH REFERENCE TO THE GATEWAY HOTEL, MANGALORE
Summer Internship Project submitted in partial fulfilment of the requirement for the
MASTERS DEGREE IN
BUSINESS ADMINISTRATION (MBA)
SUBMITTED BY:
PRESTON CHARLES D’SOUZA
2116128
Under the guidance of
MS. HARINAKSHI
Assistant Professor
ST ALOYSIUS COLLEGE (AUTONOMOUS)
ALOYSIUS INSTITUTE OF MANAGEMENT AND INFORMATION AND TECHNOLOGY
(AIMIT)
MADOOR, MANGALORE-575022
2022-2023
CHAPTER 3
RESEARCH METHODOLOGY
3.1 Statement of the Problem
The main aim of this research is to identify what are the various cost control methods and
techniques that can be used to reduce the cost of food and beverage service. There are various
factors involved in this aspect and we will be focusing on how some of these factors affect the
revenue and cost of the food and beverage department. The hospital industry has various source
of revenue but in our research, we will be only focusing on food and beverage service. The
goal of this research is to provide insights to help the Hospitality business improve their food
and beverage cost control measures.
3.2 Research Design
Research design is the framework of research methods and techniques adopted by a researcher.
The design allows researchers to zero down on research methodologies that are suitable for the
topic matter and set up their studies up for success. A research design is a framework that has
been designed to obtain answers to research questions.
The study is mostly descriptive since, it is based on the internal records and the annual records
of the company. Besides, information is obtained through observations and discussions held
with the employees of the organisation. Further, the study is partly analytical because, it offers
an appraisal of the financial accounts of The Gateway Hotel Mangalore.
3.3 Scope of the Study
The study is based on the financial information of The Gateway Hotel. The study covers the
period of 2012 to 2023 for analysing the various items like COGS, Revenue from sale of food
and beverage, Purchases, Stock etc. The scope of the study involves identifying the various
cost control methods, analysing the inventory control of the company and studying the
behaviour of cost and revenue. This study finds out the cost efficiency of the organization and
the various measures it takes to improve the cost control. The data of the past ten years are
taken into account for the study.
3.4 Data Sources
The collection of data for this research is based on both primary and secondary data. The
primary data is based on the discussions held with the employees of the organization based on
the various cost measures and techniques used. The secondary data is based on the financial
statements of the Hotel in the last ten years. Majority of data used in this study will be based
on secondary data.
Primary Data: These data are normally gathered from the person who is related to the firm.
Therefore, the additional information required for the project is collected through primary data
i.e., information has been collected from the employees of the organization.
Secondary Data: Secondary Data refers to the information or facts already accumulated such
statistics are gathered with the objectives of information past status of any variable or the
records accumulated and reported with the aid of some source is accessed and used for the
objective of a study. Normally in research, the scholars collect published statistics, journals,
annual reports and websites.
3.5 Statistical Tools and Techniques for Analysis
The collection of data for the study is collected through the Company annual reports and other
relevant documents.

Cost of Goods Sold (COGS) Analysis

Food Cost Percentage

Inventory Turnover ratio

Inventory Conversion period

Gross Profit margin

Trend Analysis
3.6 Limitations of the Study

The data received from the company may not be accurate and may pose as a limitation
for the study

Some of the data like daily cost analysis which is required for determining the cost
control is kept confidential by the company

The study is basically based on the past data obtained from the financial statement of
the Gateway Hotel; hence the figure may not hold good in future and the study may
also suffer from the limitation inherent in the financial statements.

The impact of covid has affected the actual operations of the company and so the data
in the past 2 years may not be based on the normal operations of the company.

It was a time-consuming process to separate the Cost and Revenue, of Room and Food
& Beverage services.

Since this study only focuses on Food and Beverage service it doesn’t focus on the other
factors that affects the overall performance of the company
CHAPTER 4
4.1 DATA ANALYSIS AND INTERPRETATION
Calculation Of Cost of Goods Sold:
2013:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
456.6
3563.84
355.17
3665.27
2014:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
355.17
3993.74
351.24
3997.67
2015:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
351.24
4337.47
380.71
4308
2016:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
380.71
3716.98
463.13
3634.56
2017:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
463.13
3686.96
428.73
3721.36
2018:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
428.73
4063.98
448.66
4044.05
2019:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
448.66
3630.11
372.03
3706.74
2020:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
372.03
3155.25
486.22
3041.06
2021:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
486.22
1457.11
433.11
1510.22
2022:
Particulars
Opening Stock
Add: Purchases
Less: Closing Stock
Cost of Goods Sold
₹ in Lakhs
433.11
2121.89
366.92
2188.08
4.1 Trend Analysis
Trend Analysis of Revenue and Cost of Goods Sold:
Table 4.1.1 - Table showing Trend Analysis in Revenue and Cost of Goods Sold
Year
Ended
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Revenue (₹ in Lakhs)
12,577.66
13,888.46
13,637.79
13,459
14,094
15,983.29
15,568.24
13,198.54
5,547.82
9,737.75
COGS (₹ in Lakhs)
3,665.27
3997.67
3584.09
3634.56
3,721.36
4,044.05
3,706.74
3,041.06
1,510.22
2,188.08
Revenue (%)
100
110.42
108.42
107.01
112.05
127.07
123.77
104.93
44.11
77.42
COGS (%)
100
109.06
97.78
99.16
101.53
110.33
101.13
82.96
41.20
59.69
Chart 4.1.1 - Chart showing Trend Analysis in Revenue and Cost of Goods Sold
Trend Analysis for Revenue and COGS
140,00
120,00
100,00
80,00
60,00
40,00
20,00
0,00
2013
2014
2015
2016
2017
Revenue (%)
2018
2019
2020
2021
2022
COGS (%)
Interpretation:
From 2013 to 2016, both revenue and COGS remained relatively stable, with slight
fluctuations. However, starting from 2017, there was a notable increase in revenue, peaking in
2018 at 127.08%. This indicates a period of substantial growth for the company. From 2019 to
2021, there was a significant decline in revenue, hitting a low point of 44.11% in 2021. In
contrast, COGS percentages decreased noticeably during this period, suggesting cost-saving
measures implemented by the company. The year 2022 saw an increase in both revenue and
COGS percentages, hinting at a potential recovery or growth phase for the company.
Calculation Of Food Cost Percentage:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
× 100
2013:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
3,665.27
× 100 = 29.4 %
12,577.66
2014:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
3,997.67
× 100 = 28.78%
13,888.46
2015:
2015 𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
4,308
× 100 = 31.59%
13,637.79
2016:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
3,634.56
× 100 = 27%
13,459
2017:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
3,721.36
× 100 = 26.40%
14,094
2018:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
4,044.05
× 100 = 25.30%
15,938.29
2019:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
4,706.74
× 100 = 23.81%
15,568.24
2020:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
3,041.06
× 100 = 23.04%
13,198.54
2021:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
1,510.22
× 100 = 27.22%
5,547.82
2022:
𝐹𝑜𝑜𝑑 𝐶𝑜𝑠𝑡 % =
2,188.08
× 100 = 22.47%
9,737.75
4.2 Variance Analysis
Food Cost Percentage Analysis:
Table 4.2.1 - Table showing Variance in Food Cost Percentage
Year Ended
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Actual Food Cost %
29.14
28.78
31.59
27.00
26.40
25.30
23.81
23.04
27.22
22.47
Standard Food cost %
30
30
30
30
30
30
30
26
26
26
Variance
0.86
1.22
-1.59
3.00
3.60
4.70
6.19
2.96
-1.22
3.53
Chart 4.2.1 - Chart showing Variance in Food Cost Percentage
Food Cost %
35,00
30,00
25,00
20,00
15,00
10,00
5,00
0,00
2013
2014
2015
2016
2017
Actual Food Cost %
2018
2019
2020
2021
2022
Standard Food cost %
Interpretation:
From the above chart we can see that the Actual cost is below the standard cost till 2014. In
the year 2015 we can see that the Actual Cost is above the standard cost by 1.59%, which is a
not helpful in cost control. But from 2016 to 2020 we can see that there is a consistent pattern
of the Actual cost being lower than the standard cost. From 2019 the standard was set to 26%
due to the changes caused by the COVID pandemic. In 2021 the actual cost is above the
standard cost by 1.22% but it comes back down in 2022 indicating a positive pattern.
Calculation of Gross Profit Margin
Gross Profit Margin % =
Revenue − Cost of Goods sold
× 100
Revenue
2013:
Gross Profit Margin % =
12,557.66 − 3,665.27
× 100 = 70.86%
12,557.66
2014:
Gross Profit Margin % =
13,888.46 − 3,997.67
× 100 = 71.22%
13,888.46
2015:
Gross Profit Margin % =
13,637.79 − 4,308
× 100 = 68.41%
13,637.79
2016:
Gross Profit Margin % =
13,459 − 3,634.56
× 100 = 68.41%
13,459
2017:
Gross Profit Margin % =
14,094 − 3,721.36
× 100 = 73.60%
14,094
2018:
Gross Profit Margin % =
15,983.29 − 4,044.05
× 100 = 74.70%
15,983.29
2019:
Gross Profit Margin % =
15,568.24 − 4,706.74
× 100 = 76.19%
15,568.24
2020:
Gross Profit Margin % =
13,198.54 − 3041.06
× 100 = 76.96%
13,198.54
2021:
Gross Profit Margin % =
5,547.82 − 1,510.22
× 100 = 72.78%
5,547.82
2022:
Gross Profit Margin % =
9,737.75 − 2,188.08
× 100 = 77.53%
9,737.75
Gross Profit Margin Analysis:
Table 4.2.2 - Table showing Variance in Gross Profit Margin
Year Ended
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Gross Profit margin %
70.86
71.22
68.41
73
73.6
74.57
76.19
76.96
72.78
77.53
Standard %
70
70
70
70
70
70
70
70
70
70
Variance
0.86
1.22
-1.59
3
3.6
4.57
6.19
6.96
2.78
7.53
Chart 4.2.2 - Chart showing Variance in Gross Profit Margin
Gross Profit Margin
80
78
76
74
72
70
68
66
64
62
2013
2014
2015
2016
2017
Gross Profit margin %
2018
2019
2020
2021
2022
Standard %
Interpretation:
From the above chart we can see that the Actual cost is below the standard cost till 2014. In the
year 2015 we can see that the Actual Cost is above the standard cost by 1.59%, which is a not
helpful in cost control. But from 2016 to 2020 we can see that there is a consistent pattern of
the Actual cost being lower than the standard cost. From 2019 the standard was set to 26% due
to the changes caused by the COVID pandemic. In 2021 the actual cost is above the standard
cost by 1.22% but it comes back down in 2022 indicating a positive pattern.
Calculation of Inventory Turnover Ratio
Average Inventory =
Opening Stock + Closing Stock
2
Inventory Turnover Ratio =
Cost of Goods
Average Inventory
2013:
Average Inventory =
456.6 + 355.17
= 405.89
2
Inventory Turnover Ratio =
3,665.27
= 9.03 times
405.89
2014:
Average Inventory =
355.17 + 351.24
= 353.21
2
Inventory Turnover Ratio =
3,997.67
= 11.32 times
353.21
2015:
Average Inventory =
351.24 + 380.71
= 365.98
2
Inventory Turnover Ratio =
4,308
= 11.77 times
365.98
2016:
Average Inventory =
380.71 + 463.13
= 421.92
2
Inventory Turnover Ratio =
3,634.56
= 8.61 times
421.92
2017:
Average Inventory =
463.13 + 428.73
= 445.93
2
Inventory Turnover Ratio =
3,721.36
= 8.35 times
445.93
2018:
Average Inventory =
428.73 + 448.66
= 438.70
2
Inventory Turnover Ratio =
4,044.05
= 9.22 times
438.70
2019:
Average Inventory =
448.66 + 372.03
= 410.35
2
Inventory Turnover Ratio =
3706.74
= 9.03 times
410.35
2020:
Average Inventory =
372.03 + 486.22
= 429.13
2
Inventory Turnover Ratio =
3041.06
= 7.09 times
429.13
2021:
Average Inventory =
486.22 + 433.11
= 459.67
2
Inventory Turnover Ratio =
1510.22
= 3.29 times
459.67
2022:
Average Inventory =
433.11 + 366.92
= 400.02
2
Inventory Turnover Ratio =
3997.67
= 5.47 times
400.02
4.3 Ratio Analysis
Inventory Turnover Ratio Analysis:
Table 4.3.1 - Table showing Inventory Turnover Ratio
Year Ended
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Inventory Turnover Ratio
9.03
11.32
11.77
8.61
8.35
9.22
9.03
7.09
3.29
5.47
Chart 4.3.1 - Chart showing Inventory Turnover Ratio
Inventory Turnover Ratio
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Interpretation:
The normal standard for the inventory turnover ratio is from 5 to 9. We can see that most of the
years are within this range indicating a good inventory control. We can see that in the years
2014 and 2015 it is above the range at 11.32 and 11.77 respectively indicating that it takes more
in those years. We can also see that in the year 2021 it is below the standard at 3.29 times. This
is due to the cause of changes that happened in the COVID pandemic.
Calculation of Inventory Conversion period
Inventory Coversion Period =
365
Inverntory Turnover Ratio
2013:
Inventory Turnover Ratio =
365
= 40 days
9.03
2014:
Inventory Turnover Ratio =
365
= 32 days
11.32
2015:
Inventory Turnover Ratio =
365
= 31 days
11.77
2016:
Inventory Turnover Ratio =
365
= 42 days
8.61
2017:
Inventory Turnover Ratio =
365
= 44 days
8.35
2018:
Inventory Turnover Ratio =
365
= 40 days
9.22
2019:
Inventory Turnover Ratio =
365
= 40 days
9.03
2020:
Inventory Turnover Ratio =
365
= 52 days
7.09
2021:
Inventory Turnover Ratio =
365
= 111 days
3.29
2022:
Inventory Turnover Ratio =
365
= 67 days
5.47
Inventory Conversion Period Analysis:
Table 4.3.2 - Table showing Inventory Conversion period
Inventory Conversion Period (days)
40
32
31
42
44
40
40
52
111
67
Year Ended
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Chart 4.3.2 - Chart showing Inventory Conversion period
Inventory Conversion Period (days)
120
100
80
60
40
20
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Interpretation:
The ideal conversion period is from 40 to 60 days. We can see that in most of the years this
condition is met. But in the years 2021 and 2022 we can see a rise in the days, particularly in
2021 as it takes 111 days. This is very high than the ideal range. This was caused due to the
excess stock kept during the COVID pandemic which took time to be into final goods to be
sold.
CHAPTER 5
5.1 DISCUSSION OF RESULTS AND MANAGERIAL IMPLICATIONS
5.1 Discussion of Results

Budgets are a very crucial aspects in cost control as they help to set standards which
can be compared with actual performance. These budgets can be compared with actual
performance to determine the variance.

Food cost percentage is a very commonly used calculation in food and beverage cost
control as it helps to determine that portion of cost which is incurred in obtaining the
raw materials and making the food. This can be compared with the revenue from food
and beverage

Inventory control makes sure that there is efficient utilization of resources. This makes
sure that there is no wastage and costs are minimized. It is one of the cost techniques
that is followed in most of the industries especially the Hotel industry.

The gross profit margin is crucial for food and beverage cost control as it directly
reflects the profitability of sales after accounting for direct costs. By monitoring the
gross profit margin, businesses can evaluate the effectiveness of their cost control
efforts and identify areas of improvement. It also helps in setting pricing strategies and
making informed decisions to optimize costs and maintain a healthy financial position

From 2013 to 2018, there is a consistent growth in revenue, with the highest increase
occurring in 2018.

However, starting from 2019, the revenue growth has been declining significantly,
reaching its lowest point in 2021.

This sharp drop in revenue could indicate a significant event or challenge that impacted
the company's operations and financial performance.

After 2021 the Revenue slowly starts to increase at a rate that is higher than the Cost of
goods sold indicating that the Sales are coming back to normal

The declining revenue growth combined with the fluctuations in COGS has likely
impacted the company's profitability.

The decreasing revenue growth and varying COGS percentages suggest that the
company's profitability may have been affected negatively in recent years.

In 2015, there was a significant negative variance (-1.59%) in food cost percentage.
This could imply potential issues with effective cost control

From 2016 to 2020, the actual food cost percentage remained mostly lower than the
standard, suggesting improved cost control and potentially more efficient purchasing
practices.

In 2021, there was a negative variance (-1.22%), potentially indicating challenges in
cost control during that period because of COVID 19.

The inventory turnover ratio for most of the years falls within the standard range of 5
to 9. This indicates that the company generally maintains a reasonable balance between
inventory levels and sales throughout the analysed period.

In 2014, 2015, and 2018, the ratio exceeded the standard range. However, in 2021, the
ratio fell significantly below the standard range. This indicates potential challenges in
managing inventory efficiently.

In some years, such as 2014, 2015, 2018, and 2019, the inventory conversion period
falls within the ideal range of 40 to 60 days. This suggests that the company effectively
manages its inventory,

In 2016, 2017, and 2022, the conversion period exceeds 60 days, indicating potential
inefficiencies in converting inventory into sales.

The company's gross profit margin percentage has generally been higher than the
standard percentage throughout the analysed period.

This indicates that the company has been able to generate a healthy profit margin on its
sales, exceeding the industry standard.
5.2 Managerial Implications

When the company faces challenges in maintain revenue, they should take steps to keep
their expenditure under control.

The company has been suggested to reduce the expenditure as it increases every year.
Decrease in expenses will increase the profitability.

Since Cost of Goods sold is one of the factors fluctuating the revenue, it must be
maintained in a satisfactory range.

The company must make sure that Cost of Goods sold always remains below the
revenue.

Food cost percentage must be maintained within the standard by dealing with effective
issues in the purchase of raw materials.

A potential increase in sales relative to inventory levels or a decrease in average
inventory, could impact cash flow, carrying costs, and overall operational efficiency.

The company should effectively manage its inventory, maintain balance between
stocking enough inventory to meet demand and avoiding excessive inventory levels.

The Revenue and Cost of Goods sold must be maintained in such a way that the Gross
Profit is always within the required standard.
CONCLUSION AND FUTURE SCOPE OF RESEARCH
Conclusion
In the current market conditions, Cost control plays a very important role and it is the nerve
of any organization, especially the Hospitality sector. The study of Cost control in the Food
and Beverage service of The Gateway Hotel, Mangalore indicates that the Company’s Cost
performance is satisfactory. Only in 2019-2021 the Company faced certain challenges due to
the Covid pandemic. The Gateway Hotel, Mangalore provides goods service for their clients
with their variety services. The modern technology in the hospitality industry is the reason
for the improvement which has been seen in all departments of the hotel service. The trend
analysis reveals that Revenue has always been above COGS which indicates good cost
management. Food cost percentage has also been kept within the standard indication proper
control of purchases and inventory. Gross profit has been maintained up to the required
margin which indicates the consistency in the current profit position of the company. The
suggestions provided through the study will help the company to improve the operational
cost performance efficiently.
Future Scope of Research
The hospitality industry is becoming one of the most demandable industries in the world day
by day. It plays a vital role for flourishing the business more. It is something which will remain
for an unseen period and there is wide scope for improvisation through countless opportunities
and uncertainty there is always scope for future research. As it is a service-based industry the
executives are also very conscious about the level of service quality to ensure more customer
satisfaction in order to increase their profit margin. This research can be helpful to the
management in evaluating the cost control of the organization and. It can be used for academic
purpose too. The data will be outdated in a few years and new data will be available which will
provide opportunity for future researchers to analyses the new and updated data and get
meaningful insights from it and draw conclusions.