Y2.U3.1
Cost Overview
Intro
• Why
• What/types
• How
Why
In order to survive revenue must be higher than cost.
Revenue: income from sales before expenses, or costs are subtracted.
Cost: is the price an operation pays out in the purchasing and
preparation of its products, or the providing of its service.
Cost control is a business’s efforts to control how much it spends
Cost Classifications
Controlable:
Variable: go up and down in direct proportion to sales
Semivariable: go up and down but not in direct proportion
Noncontrolable: Insurance, mortgage, utilities
Fixed: remain the same regardless of sales volume, overhead
Types
Food
Variable, Controllable
Beverage
Variable, Controllable
Labor
Semivariable, Controllable & Noncontrollable
Overhead
Fixed, Noncontrollable
Operating Budgets
• A financial plan for a specific period of time, lists the
anticipated sales revenue and projected costs, giving an
estimate of profit and loss for a period of time, usually
monthly
• Analyzing controllable cost needs, such as labor, food, beverage
and supplies
• Outlining operating goals and managers’ performance
responsibilities
• Measuring actual performance against anticipated performance
Operating Budgets
Operating Budgets
Operating budgets are based on forecasts
• Forecast: prediction of sales levels or costs over a period of time
• Methods of forecast rely on historical data, such as average sales per
customer (total dollar sales / total number of customers)
Operational Records
• Sales History: number of portions of every item sold on a menu
• Production sheet: lists all menu items that are going to be prepared
for a given date
• POS (point of sales) systems can report
• Moving Average Technique: (smoothing technique) several periods
averaged together
Forecasting
• Analyze sales history
• (rem. Mkt plan)
• Account for externalities
• Blizzard/heatwave
• Predict sales volume
• Adjust accordingly
• Predict sales mix
• Anticipate item sales
Profit and Loss Reports
A P&L is a compilation of sales and cost information for a
specific period of time
• Also called an income statement
• Shows whether an operation made or lost money over a
specific period of time
• Can compare actual to goals
• Lists income first then expences
• Helps detect variances and/or problems and make
adjustments
Cost Control Tools
POS- point of sales
Full line supplier- offers complicated programs
When choosing technology, will it
• Enhance guest satisfaction?
• Help increase revenue?
• Help reduce cost?
• Increase employee or management productivity?
• Improve communication?