BUDGET ASSIGNMENT
Memorial Hospital Operating Budget
Team Members
Tessie Atwater
McKinsey Cornelison
Danielle Quinton
Heather Ray
NDFS 458
Management
Memorial Hospital Operating Budget
I.
Planning
A. Mission Statement: To create a friendly, happy, and efficient work environment that
encourages employees to rise to their potential and help patients feel at home and
loved.
B. Goals
1. Identify areas in the budget where we can increase revenue while
decreasing expenses.
2. Increase employee morale, attitude, and enthusiasm for coming to work.
3. Develop and refine leadership skills of the three supervisors.
C. Long-term objectives
1. Have turnover rate less than 20% and absences from work less than 10% by
2020.
2. By 2020, increase frequency of training and cross trainings to a biweekly
schedule to increase leadership in the kitchen.
3. Get out of debt by 2026.
D. Short-term objectives
1. Calculate current average meal cost and research what individuals are
willing to pay for a meal in order to establish appropriate food prices by
January 2016.
 Plans and procedures for objective 1:
o Conduct monthly physical inventories on the 26th of each
month.
o Research 5 other food companies and compare prices to see if
there are other options to decrease food cost.
o Track food waste to see if meals are too big and can be
reduced in portion sizes.
o Advertising on Hospital website, as well as around hospital
o Create and enforce use of standardized recipes so that each
meal or menu item costs the same to produce as another item
of the same type
o Plan and implement theme days on at least an annual basis
o Have bakery section that makes special desserts- cookies$1.49, cupcakes/muffins- $2.49, pie/cake- $3.49
2. Disperse Minnesota Satisfaction Questionnaire to identify realistic options to
help employees feel happier and more satisfied at work by January 2016.
 Plans and procedures for objective 2:
o Questionnaires will be passed out and collected by the end of
January. Options include music in the kitchen, parties, recipe
competitions, etc.
o Have regular and consistent staff meetings that train and
inform employees each week on Tuesday at 3pm.
3. Create ten new in-service leadership trainings for the three supervisors by
February 2016 to improve their management and leadership skills with the
foodservice employees.
 Plans and procedures for objective 3:
o Get Supervisors involved in the in-service trainings
o Have supervisors teach portions that will specialize employees
in different areas of the kitchen
II-III.
Refer to Budget Spreadsheet for operating and capital budget.
IV.
Operating Statistics
Food Cost per Meal
COGS/# of meals
2014
2015
2016
2017
Equation
$1,261,724/425,000 =
$1,286,958.48/371,429 =
$1,515,944/440,750 =
$1,546,262.88/455,350 =
Food Cost/Meal
$2.96
$3.46
$3.43
$3.39
Labor Cost per Meal
Total labor cost/# of meals
2014
2015
2016
2017
Equation
$1,007,013.20/425,000 =
$1,007,013.20/371,429 =
$1,007,013.20/440,750 =
$1,007,013.20/455,350 =
Labor Cost/Meal
$2.36
$2.71
$2.28
$2.21
Total Cost per Meal
(COGS + Labor cost + Other expenses)/# of meals
2014
2015
2016
2017
Equation
$2,297,617.20/425,000 =
$2,322,851.68/371,429 =
$2,551,837.20/440,750 =
$2,582,156.08/455,350 =
Total Cost/Meal
$5.40
$6.25
$5.79
$5.67
Meals per Labor Hour
# of meals/# of labor hours worked
2014
2015
2016
2017
Equation
425,000/24,232 =
371,429/24,232 =
440,750/24,232 =
455,350/24,232 =
Meals/Labor Hour
17.5
15.3
18.2
18.8
Labor Minute per Meal
# of labor minutes/# of meals
2014
2015
2016
2017
Equation
1,453,920/425,000 =
1,453,920/371,429 =
1,453,920/440,750 =
1,453,920/455,350 =
Labor Minutes/Meal
3.4 min
3.9 min
3.2 min
3.1 min
Food Cost Percentage
COGS/Sales
2014
2015
2016
2017
Equation
$1,261,724/$1,541,250 =
$1,286,958.48/$1,281,428.57 =
$1,515,944/$2,202,055 =
$1,546,262.88/$2,288,779 =
Food Cost %
81.8%
100%
68.8%
67.5%
Labor Cost Percentage
Cost of Labor/Sales
2014
2015
2016
2017
Equation
$1,007,013.20/$1,541,250 =
$1,007,013.20/$1,281,428.57 =
$1,007,013.20/$2,202,055 =
$1,007,013.20/$2,288,779 =
Labor Cost %
65.3%
78.5%
45.7%
43.9%
V.
Analysis
A. Changes
1. Increased price of both patient meal and cafeteria meal.
1. $1,261,724.00 (COFS)/425,000 (# of meals) = $2.97
a. Patient meal was increased to $2.97 to allow for sufficient
profit. The original price did not even cover food costs.
b. Cafeteria meal for non-patients was increased to $5.94, which
is 200% of the original price.
2. Equipment
1. Purchased Rationale Oven to replace the conventional oven. A
rationale oven is a more multifunctional piece of equipment and will
save labor hours and food waste from cooking time mistakes.
$15,440 Rational
Self-Cooking Center
5 Senses Model.
Holds 10 pans at
once!
2. Purchased an industrial grade Hobart mixer for the new bakery. A
large Hobart mixer will allow large batches of bakery items to be
prepared quickly and efficiently, maximizing production and profits.
$5,180.56 Hobart
Legacy 20 quart
industrial mixer
3. Tracked food waste by correcting inventory prices.
4. Used bid system to find companies that have the absolute lowest food
prices, while matching desired specs.
5. Introduced and enforced the use of standardized recipes to decrease food
waste and increase labor efficiency.
6. Increased advertising to attract more customers, catered to hospital
employees and patient families.
7. Posted the menu on the hospital website. Put up fun, colorful, appetizing
posters around the hospital that advertised the cafeteria food.
8. Created a five-week rotating menu to spice up the menu. Most menu items
are essentially the same, but names are different with enticing captions
describing the food.
9. Implemented a tab system (taking money directly from employee’s check)
for employees in order to to encourage them to eat the cafeteria food which
will increase sales. Focused marketing efforts toward doctors, nurses,
custodians, and other employees in the hospital.
10. On average we increased meals by 30/day through advertising. On theme
days (one a month, which are different themes each month) we increase
sales by 400. This increases sales by 4,800 meals a year due to theme day.
11. Because we are starting to sell desserts, we need a 20 quart hobart mixer
worth $5,180.00. Paid off in 2 years for $2,590 each year.
12. Because of our increase in sales, we need the rational oven to cook enough
food in the appropriate time. Paying it off in three years. Total cost: $15,440.
3 payments of $5147.00
13. We better trained employees on proper cleaning and handling procedures of
minor equipment which reduced the cost of minor equipment to $10,000.00.
VI.
Explanations
A. We assumed that a substantial amount of food waste was occurring due to the lack
of standardized recipe use and labor inefficiency.
B. We assumed potential customers didn’t know about the food in the cafeteria or they
didn’t think they would like it because of the ‘hospital food’ stigma. We assumed
that cafeteria meals increased because of advertising techniques. Meals/day
increased by 30 meals on average, largely due to patients’ families eating in
cafeteria.
C. We assumed staff typically bring their own food for break. Thus, we implemented a
tab system to increase the amount of meals employees purchase and eat in the
cafeteria.
D. We assumed continuing education is $300/year for the department manager.
E. We assumed supply cost will increase due to theme day and promotion by $1,745.
Each year we will increase it by $500.