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Successful restaurant personnel, including chefs, restaurant managers,
food and beverage controllers, dining room managers, and stewards have
the ability to keep costs at predetermined levels. They understand that
successful operations require that costs be carefully established and
monitored so that profit will result.

Food, beverage, and labor costs generally represent between 60% and
70% of the total costs of a restaurant operation. If these costs are not
carefully established and monitored, they can gradually increase until
profit is eliminated and losses are sustained.

Learning Objectives
1. Define the terms cost and sales .
2. Define and provide an example of the following types of costs: fixed,
directly variable, semi variable, controllable, non controllable, unit,
total, prime, historical, and planned.
3. Provide several examples illustrating monetary and nonmonetary sales
4. Describe the significance of cost - to - sales relationships and identify
several cost - to - sales ratios important in food and beverage
5. Identify the formulas used to compute cost percent and sales price.
6. Describe factors that cause industry wide variations in cost
7. Explain the value of comparing current cost - to - sales ratios with
3 those for previous periods.
Cost Concepts
Accountants define a cost as a reduction in the value of an
asset for the purpose of securing benefit or gains.
In F&B Business cost is defined as the expense to a hotel or
restaurant of goods or service when the goods are consumed
or the service rendered.
Food and beverage are Consumed when they are used,
wastefully or otherwise, and are no longer available for the
purpose which they were acquired.(Units: weight, volume or
total value)
The cost of labor is incurred when people are on duty, whether
or not they are working and whether they are paid at the end
of the shift or at some later date. (Hourly or weekly or

Cost Concept
Fixed Cost (FC) and Variable Cost (VC) are used to
distinguished between those cost that have no direct
relationship to business and those that do.
Fixed Cost are those that are normally unaffected by changes
in sales volume. Such as = real estate taxes, insurance
premiums, depreciation, repairs and maintenance, rent or
occupancy cost, most utility cost, advertisement, professional
The term fixed should never taken to mean static or unchanging
but merely to indicate that any changes that may occur in such
cost are related only indirectly or distantly to changes in
business volume.

Cost Concept
Variable Cost are those that are clearly related to business
volume. As business volume increase, variable cost will increase
and vice versa.
Food & Beverage cost are considered directly variable cost.
Direct Variable Cost are those that are directly linked to
volume of business increase and decrease of volume
Payroll Cost includes salaries and wages and employee
benefits and often referred as Labor Cost.
Because labor cost consist of fixed and variable element it is
known as semi-variable cost, meaning a portion should change
in short-term and the other portion remains unchanged.

Cost Concept
Controllable cost are those that can be change in the
short term such as Direct Variable Cost, Wages,
Advertising & Promotion, Utilities, Repairs &
Maintenance and Administration and General

Non-Controllable cost are those that cannot normally be

changed in short-term such as fixed cost like Rent, Interest
on a mortgage, Real estate taxes, License fee and

Cost Concept
Unit Cost may be food & beverage portion as in the cost of
one item or hourly unit of work. In F&B business unit cost
are commonly in average unit cost rather then actual
unit cost.
Total Cost are the total of food & beverage portions served
in one period such as a week or a month or total cost of
labor for one period.

Cost Concept
Prime Cost is a term used in the Hotel Industry refer to the cost
of materials and labor. (Food, Beverage and Payroll)
Historical and Planned Costs
Historical cost are all cost are historical - that is, that they can
be found in business records, book of account, financial
statements, invoices, employees time card and other similar
records. It is used for establishing unit cost, determining menu
prices and comparing present with past labor cost.
It will be used for planning and determining the future to develop
planned costs - projections of what cost will be or should be for
a future period. It is often called as Budgeting.

Industry-wide Variations in Cost
Cost percentage vary considerably from one foodservice operation to
other. This is due to many possible reasons.
Basically there are two types of foodservice operation.
Those that operate at low profit margin and depends on relatively
high business volume.
Those that operate at relatively high profit margin thus does not
require high business volume.

Sales Concept
Sales Defined
In general, the term sales is defined as revenue resulting
from the exchange for a products (Food & Beverage) and
service (Waiter) for value ($$).
The sales concept in F&B operation usually can be express
as: monetary and non-monetary.

Monetary Terms
Total Sales is a term that refers to the total volume of
expressed in dollar term for instant any given period , such as a
week, a month or a year.
By Category. Total dollar volume of sales by category are
total food sales or total beverage sales. Or total steak sales or
seafood sales.
By Server. This is total dollar volume of sales for which a
given server has been responsible in a given period. This is to
help the management to make judgment on employees
By Seat. Usually for a year period. Total Dollar sales divided
by the number of seats in the restaurant.

Monetary Terms
Sales Price refers to the amount charged each customer
purchasing one unit of a particular item. It can be a single meal or
entire meal.
Average Sale in business is determine by adding individual sales
to determine a total and then dividing that total by the number of
individual sales. Two types of commonly calculated averages are:
average sale per customer and average sale per server.
Per Customer is the result of dividing total dollar sales by the
number of sales or customer.
Per Server is total dollar sales for an individual server divided
by number of customer served by that individual.

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
= $565 30
= $18.83
Non-Monetary Terms
Total Number Sold refers to the total number of menu item sold
in a given time period.
Cover is the term used to describe one diner regardless of the
quantity of good the person consumes.
Total Cover refer to the total number of customer served in a
given period. Help to make judgment & comparisons
Average Covers is determined y dividing the total number of cover
for a given period by some other number such as hour of operation,
day of operation or numbers of server.
1. Cover per Hour = Total Covers / No. of Hours of Op.
2. Covers per Day = Total Covers / No. of Days of Op.
3. Covers per Server = Total Covers / No. of Servers

Non-Monetary Terms

Seat Turnover or simply turnover refer to the number of seats

occupied during a given period (or number of cover) divided by the
number of seats available.

140 customers served during that one Saturday meal.

The restaurant has 75 seats, so seat turnover would be calculated
as follows:

Seat turnover = Number of customers served Number

of seats
= 140 75
= 1.87 turns

Non-Monetary Terms
Sales Mix is a term used to describe the relative quantity sold
of any menu item compared to other items in the same
Sales Mix For the Sugar & Spice Restaurant
August 20xx

Menu Item Portion Sales Sales Mix

Strip steak 1,000 12.5%
Ginger shrimp 1,200 15.0
Lamb chop 1,800 22.5
Vege buritto 2,400 30.0
Chicken chop 1,600 20.0

Totals 8,000 100.0%

The Cost-to-Sales Ratio

Foodservice establishment calculate cost in dollars and compare

those cost to sales in dollars. This enable them to discuss the
relationship between cost and sales or the cost per dollar of sale.
Cost Sales = Cost per dollar of sale

decimal answer, and any decimal can be converted to a percentage

if one multiplies it by 100 and adds a percent
sign (%).
Cost Sales x 100 = Cost%
$ 312,090 $ 891,687 = .35 and .35 x 100 = 35.0 %

Food cost Food sales x 100 =Food cost%

Beverage cost Beverage sales x 100 = Beverage cost%
Labor cost Total sales x 100 = Labor cost%

The Cost-to-Sales Ratio
The formula also can be use to determine the Sales price if the
cost% is known.
Cost cost% = Sales(or Sales Price)
If the given cost percentage were 30.0 percent and the food cost
for the item were $3.60, the appropriate sales price would be
$12.00, illustrated here

30.0 % 100 = 0.3

$ 3.60 0.3 = $12.00

The Cost-to-Sales Ratio
The formula also can be use to determine the cost if the spending
power and cost% is known.
Suppose this banquet manager is dealing with a group willing to
spend $15.00 per person for a banquet, and the same given 30.0
percent cost percent is to apply. Calculation of the maximum
permissible cost per person is facilitated by rearranging the
formula once again:
Sales x Cost % ( expressed as a decimal ) = Cost
Sales X Cost % = Cost

So the cost per person can be calculated as $4.50:

30.0 % 100 = 0.3
$ 15.00 X 0.3 = $ 4.50

1. Given the following information, calculate cost percentages. Round
your answers to the nearest tenth of a percent.
a. Cost, $200.00; Sales, $500.00
b. Cost, $150.00; Sales, $500.00
c. Cost, $178.50; Sales, $700.00
d. Cost, $216.80; Sales, $800.00
2. Calculate cost, given the following figures for cost percent and sales:
a. Cost percent, 28.0%; Sales, $500.00
b. Cost percent, 34.5%; Sales, $2,400.00
c. Cost percent, 24.8%; Sales, $225.00
d. Cost percent, 31.6%; Sales, $1,065.00
3. Calculate sales, given the following figures for cost percent and cost:
a. Cost percent, 30.0%; Cost, $90.00
b. Cost percent, 25.0%; Cost, $500.00
c. Cost percent, 33.3%; Cost, $1,000.00
d. Cost percent, 27.3%; Cost, $1,300.40

4. Sales records for a luncheon in the Zalikas Restaurant for a recent week
were: Given this information, calculate the sales mix.
Item A, 196
Item B, 72
Item C, 142
Item D, 24
Item E, 112
Item F, 224
Item G, 162

5. Calculate the average check from the following data:

a. Sales, $1,000.00; Number of customers, 125
b. Sales, $1,300.00; Number of customers, 158
c. Sales, $8,720.53; Number of customers, 976

6. The following table indicates the number of covers served and the gross
sales per server for one three - hour period in Asyikins Restaurant.
Determine: (a) the average number of covers served per hour per
(b) the average sale per server for the three - hour period.
Server Covers Served Gross Sales Per Server
Fadhli 71 $237.40
Azuan 66 $263.95
Nadia 58 $188.25

7. Use the information about Asyikins Restaurant identified in Question 6 to

complete the following:
a. Calculate the average check.
b. Calculate the turnover for the three - hour period if there are 65 seats
in the restaurant.


The Control Process
The control in the F&B industry really means controlling people
action. These are the factors:-
Food does not disappear by itself, without help
Excess quantity of food and beverage into the plate and glass.
Employees wages calculation are not base on the wrong
numbers of hours unless someone gives the wrong
Food are not consumed by pest unless made available by
Customer seldom leave without paying unless make possible.

Managing Income & Expenses

Food Service Management

It is important that the foodservice manager must be a
talented individual. These criteria are true:
The person must be able to grab opportunities & profit
A unique sales person
Good personality with the guest
Hard working person and most important
The person is the controller or regulator of the operation to
achieved maximized profits and minimize costs.

Managing Income & Expenses

Income can be managed in may ways thus to insure profit.
Increasing income can be done by increasing the number of guest
and the amount of money they spent.
This goal can be achieved by suggestive selling, creative menu
pricing and discount.
Our main goal in this course is not to sale but controlling expenses.
There are four major expense categories that must be controlled by
management. They are

The Control Process
1.Definition of Control
Control is a process used by managers to direct, regulate and
restrain the actions of people so that the established goals of
an enterprise may be achieved.
2.Cost Control Defined
Cost Control defined as the process used by managers to
regulate cost and guard against excessive costs.
It is an ongoing process throughout the operation.
Two principle of the principal causes of excessive cost are
inefficiency and waste.

The Control Process
3. Sales Control

Sales Control is important to ensure that all sales results in

appropriate income to the business. Therefore, it is important
to require that each employees record each sales accurately.
(Checks, duplicates, bills or etc.)
4. Responsibility For Control
Responsibility is clearly falls onto the management, but the
task on controlling differ due to the nature of the
Small establishment the control responsibility usually taken by
the management but for larger establishment it is delegated
to the assistant manager or controller.

The Control Process

5. Instituting Control
Food & beverage establishment usually involves process of
raw material purchased, received, stored and issued for the
purpose of manufacturing products for sale and services.
At each stage of operation, it is necessary to institute control
in order to stop pilferage or problems.
Each control must be suitable to each of the operation,
depends on the nature of material and service requiring
control and on the degree of difficulty inherent
(fundamentals) in instituting the control.

The Control Techniques
1. Establishing Standard
Standard are defined as rules or measures established for
making comparisons and judgments.
Quality Standards are used to define the degree of excellence of
raw materials, finished products and by extensions, work
Quantity Standard are defined as measures of weight, count or
volume used to make comparisons and judgment.
Standard Cost is defined as the cost of goods or services
identified, approved and accepted by management in order to
make judgment and comparisons of the effectiveness of the
operation. Thus standard cost must be calculated as accurately as

The Control Techniques
2. Establishing Procedures
Procedures are the method employed to prepare products or
perform jobs.
Standard Procedures are those that have be established as the
correct methods, routines and techniques for day-to-day
Production procedures must be standardized for several reasons.
One of the most important of these is customer satisfaction. Any
given item should be produced by the same method and with the
same ingredients every time it is served. It should also be served
in the same quantity each time, partly so that regular customers
will be given the same quantity each time they order the item, and
partly to maintain cost standards.

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.

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
4. Setting Example
Employees in an operation follow the examples set by the
manager the manager s behavior, manner, responses to
questions, and even a failure to speak or take action in some
The behavior of individuals in a group tends to be influenced by
the actions, statements and attitudes of their leaders.
Work Habits, attitudes, behavior, spirit of a manager are the

If the manager who has occasion to help employees plate food for
the dining room serves incorrect portion sizes, employees will be
more likely to do the same when the manager is not there.
Similarly, if a manager is inclined to wrap parcels of food to take
home for personal use, employees will be more likely to do so.

The Control Techniques
5. Observing and Correcting Employee Actions
One of a manager s important tasks is to observe the actions of
all employees continually as they go about their daily jobs,
judging those actions in the light of the standards and standard
procedures established for their work.
If any employees are failing to follow the standards, it is a
managers responsibility to correct their performance to the extent
necessary at the appropriate time.

The Control Techniques
6. Requiring Records and Reports
Recording and reports is an important element in control as these
information helps in decision making, judgment & comparisons of
the operations. One such report is the statement of income.
it is important to recognize that managers need timely
information to determine whether primary goals and sub goals
are being met. If timely records and reports are not available,
opportunities for taking corrective action may be lost.

The Control Techniques
7. Discipline Employees
Discipline is defined as action taken to give a warning, punish or
telling off an employee for work performance or personal
behavior incompatible with established standards
It is seldom practice but only used as a deterrent or if corrective
action failed.
By selecting the right people for the various jobs those with
the experience, skill, and personal characteristics that match the
job requirements the number of individuals requiring some level
of discipline can be reduced to a bare minimum. However, every
manager must face the fact that, at times, an individual staff
member must be disciplined.

The Control Techniques
8. Preparing and Following Budgets
Preparing and following budgets may be the most common
technique for controlling business operations
Budget is defined as a financial plan and may be describe as a
realistic expression of managements goals and objectives
expressed in financial terms. (Cash flow budget, capital
equipment budget and advertising budget.)
Operation Budget is the most important budget for F&B
manager. It is a forecast of sales activity and an estimate of
cost that will be incurred in the process of generating those

1. An operating budget is normally prepared using historical
information from previous budget and other financial records.
2. The second step is to calculated the percentage and analysis of
the previous records.
3. Then making assumption or judgment base on all the
influencing factors that might effect the business operation
during the forecasted period, and computing into the new
Flexible budget normally prepared for levels of business volume
above and below the expected level. (See Illustration)

Golden Dragon Restaurant Statement of Income for the year Ended December 20XX
SALES RM % of Sales
Food 786,250 85.0%
Beverage 138,750 15.0%
Total Sales 925,000 100.0%
Food 275,187 35.0%
Beverage 34,688 25.0%
Total Cost of Sales 309,875 33.5%
GROSS PROFIT 615,125 66.5%
Salaries and Wages 185,000 20.0%
Employee Benefits 46,250 5.0%
Other Controllable Expenses 138,750 15.0%
Total Controllable Expenses 370,000 40.0%
OCCUPANCY COST 78,625 8.5%
DEPRECIATION 46,250 5.0%
The Control Process
Consist of the following four steps:
1. Establish standard and standard procedures for operation.
2. Train all individual to follow established standards and standard
3. Monitor performance and compare actual performance with established
4. Take appropriate actions to correct deviations from standards.

1. What is the purpose of cost control? Of sales control?
2. Define:
Flexible budget
Standard cost
Operating budget
Standard procedures
Quality standards
Quantity standards
Sales control
Control system
Cost control
43 Control process
3. The following information has been prepared by the manager of the
Market Restaurant. Using this information, prepare an operating budget
for the Market Restaurant for the coming year, following the illustration
provided in this chapter.
Food sales: $820,000
Beverage sales: $290,000
Cost of food: 36 percent of food sales
Cost of beverages: 24 percent of beverage sales
Salaries and wages: $102,000
Employee benefit: 25 percent of total salaries and wages
Other controllable expenses: $95,000
Depreciation: $65,500
Interest: $55,000
Occupancy costs: $56,000


Cost/Volume/Profit Relationship
The Key to understand cost/volume/profit relationship lies in
understanding that fixed costs exist in an operation regardless of
sale volume and that it is necessary to generate sufficient total
volume to cover both fixed and variable costs as well as desired
It should be apparent that relationship exist between and among
sales, cost of sales, cost of labor, cost of overhead and profit. In fact
these relationship can be expressed as follows:
Sales = Cost of sales + Cost of labor + cost of overhead +

Cost/Volume/Profit Relationship
The relationship formula
Because cost of sale is variable, cost of labor includes fixed and
variable elements and cost of overhead is fixed, one should restate
this equation as follows:

S = VC + FC + P

In fact this is the basic equation of cost/volume/profit analysis

S = Sales
VC = Variable Cost
FC = Fixed Cost
P = Profit.

Cost/Volume/Profit Relationship
Three guideline of references to remember
1. Within the normal range of business operations, there is a
relationship between variable costs and sales that remains
relatively constant. That relationship is a ratio that is normally
expressed either as a percentage or as a decimal point.
2. By Contrast, fixed costs tend to remain constant in dollar terms,
regardless of changes in dollar sales volume. Consequently,
whether expressed as a percentage or as decimal, the relationship
between fixed costs and sales changes as sales volume increase or
3. Once acceptable levels are determined for costs, they must be
controlled if the operation is to be profitable.



Food 96,678.00

Beverage 12,188.00

PAYROLL 81259.00




Step (1). Determine total variable cost
Total variable cost consists of food cost, beverage cost,
and the variable portion of labor cost. We will assume
that labor cost is $81259.00 40% variable and 60%

Food Cost $96,678.00

Beverage Cost 12,188.00
Variable labor Cost (40%) 32,503.60
Total Variable Cost 141,369.60

Step (2) Determine total fixed cost
Fixed labor Cost (60%) $48,755.40
Other Controllable Exp. 46,750.00
Occupancy Cost 29,500.00
Interest 5,000.00
Depreciation 16,250.00
Total Fixed Cost 146,255.40
Profit desired is $37,375.00
The basic cost/volume/profit equation at the level of sales
Variable Rate & Contribution Rate

Variable Rate is the ratio of variable cost to dollar sales.

It is obviously determined by dividing variable cost by
dollar sales and is expresses in decimal form.
Variable Rate (VR) = Variable Cost / Sales
or VR = VC / S
VR= VC (141,375) / S (325,000)
43.5 percent of dollar sales is needed to cover the variable costs, or that
$0.435 of each dollar of sales is required for that purpose.

Variable Rate & Contribution Rate
If 43.5% of dollar sales is needed to cover VC, then
the remainder 56.5% is available for other purpose:
1. Meeting Fixed Costs
2. Providing Profit
Thus, $0.565 of each dollar of sales is available to
contribute to covering fixed costs and providing profit.
This percentage (or ratio, or rate) is known as the
Contributing rate or CR.
# The contributing rate is determined by subtracting
the variable rate from 1.
CR = 1 - VR
= 1 - .435
= .565
Breakeven Point
No business can be termed profitable until all of the fixed
cost have been met.
if sales cannot cover both variable cost & fixed cost it is
operating at a loss
if sales can cover both variable cost & fixed cost exactly
but insufficient to provide any profit.
(I.e, profit = 0) the business is said to be operating at the
breakeven point (BE)
Changing the Breakeven Point
Two ways to change Breakeven point is by
1. Increase menu price
2. Reduce Variable cost

Calculate CVP
Gather all the information that have been calculated

Sales = 325,000.00
VC = 141,375.00
FC = 146,250.00
Profit = 37,375.00
VR = .435
CR = .565
Sales = or
This formula can be used to determine the level of dollar sales
required to earn any profit that one might choose to put into the
equation. FC + P
Fixed Cost + Profit S=
Sales = CR
Contribution Rate

146,250 + 37,375 Sales = 325,000


Calculate Breakeven Point
By using the same formula, we can actually can determine the Breakeven
point, a which profit would be equal to zero dollar

FC + P Sales = $146,250 + 0
CR .565

Sales = $258,849.55
rounded as = $258,850.00

At this level
VC is 43.5% of sales = 112,599.75 or 112,600.00

56 = (VC)$112,600 + (FC)$146,250 +(P)$0.00
Breakeven Analysis
The Graduate Restaurant achieved sales level of $325,000, which
was $66,150 beyond BE. At this level, beyond BE, there are no
more fixed cost to be cover for each dollar of sales but have
variable cost. Variable Cost can be determined by multiplying S
(Sales) by VR (Variable Rate) = .435
(VC) $28,775 = (S) $66,150 X (VR) .435
If $28,775 in VC is subtracted from sales of $66,150 the result
$37,375 is equal to profit (P). It consist of $0.565 of each dollar
sales beyond BE.
(P) $37,375 = (S) $66,160 x (CR) .565

Contribution Margin
Each dollar of sales, may also be divided in two portions.
1. That which must be used to cover variable cost associated with
the item sold.
2. That which remains to cover fixed costs and to provide profit.
The dollar amount remaining after VC have been subtracted from
the sales dollar is defined as the Contribution Margin (CM).
Contribution Margin must go to cover all fixed and variable cost
until breakeven is reached, after breakeven is reached,
contribution margin becomes profit.
Sales - Variable Cost = Contribution Margin

Cost/Volume/Profit Analysis
Certain assumptions that need to be understand in C.V.P analysis are:
1. Cost is a particular establishment can be classified as fixed and
variable with reasonable accuracy.
2. Variable cost are directly variable
3. Fixed cost are relatively stable and will remain so within the relevant
range of business operations
4. Sales prices will remain constant for the period covered by the
5. The sales mix in the restaurant will also remain relatively constant for
the period.

CVP Analysis
The questions that we want to answer through CVP analysis are
likely to be:
What profit will be established earn at a given sales level?
What level of sale will be required to earn in given profit?
How many sales (or cover) will be required in order to reach the
breakeven point?
The question that con be sort into the different categories:
1. Those requiring answer stated in term of money
2. Those requiring answer stated in term of number of sales.

Dollar Formulas & Calculation
Formula # 1
Formula to determining the dollar sales level required to
earn any planned or targeted profit, given a dollar total of
fixed cost and an expected variable rate (VR)

FC + P
1 - VR (or CR)
This formula can also be use to determine BE by P = 0
Formula # 2 CR = FC + P/S
Formula # 3 P = (S X CR) FC
Formula # 4 FC = (S X CR) P

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
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

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
a. Cost of sales, $46,500; cost of labor, $33,247; cost of
overhead, $75,883; profit, $3,129.
b. Cost of sales, $51,259; cost of labor, $77,351; cost of overhead,
$42,248; loss, $41,167.

2. Given the following information, find contribution

a. Average sales price per unit, $13.22; average variable cost per
unit, $5.78
b. Average sales price per unit, $14.50; average variable rate, .36
c. Average sales price per unit, $16.20; average contribution rate,
3. Given the following information, find variable rate:
a. Sales price per unit, $19.25; variable cost per unit, $6.70
b. Total sales, $164,328; total variable cost, $72,304.32
c. Sales price per unit, $18.80; contribution margin, $10.72
d. Sales price per unit, $16.37; total fixed costs, $142,408; total unit
sales, 19,364; total profit, $22,952.80
4. Given the following information, find contribution rate:
a. Sales price per unit, $18.50; contribution margin, $10.08
b. Sales price per unit, $17.50; variable cost per unit, $6.95
c. Total sales, $64,726; total variable cost, $40,130.12
5. Given the following information, find break - even point
in Number of Customers:
a. Fixed costs, $113,231.64; contribution margin, $2.28

b. Sales price per unit, $17.22; fixed costs, $215,035.68;

variable cost per unit, $6.98.

6. Given the following information, find number of

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

b. Variable cost per unit, $5.30; profit equal to 18 percent of

$211,000; sales price per unit, $16.30; fixed costs, $86,609
Food Costs RM188,625

Variable Labor Costs RM61,200

Occupancy Costs RM55,500

Interest RM20,025

Depreciation RM33,750

Beverage Costs RM 42,750

Fixed Labor Costs RM85,575

Other Controllable Expenses RM 76,500

a) What is the establishments 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?

Food Purchasing Control
Responsibility for Purchasing
The responsibility of purchasing can be delegate to any
one in the foodservice operation depending on
organizational structure and management policies.
Control Process and Purchasing
Four steps in the control process apply here:
1. Requiring that standards and standard procedures
be established
2. That employees be trained to follow those standards
and standard procedures
3.That employee out-put be monitored and compared
to established standards
4. Remedial action be taken as needed
Food Purchasing Control

Perishable and Non-perishable

Perishable are those items, typically fresh foods, that
have a comparatively short useful life after they have
been received. Should be purchased for immediate use
only as they deteriorate quickly.

Non-perishable are those food items that have a

longer shelf life. Often referred to as groceries or
staple. They may be stored in the containers in which
they are received, stored on shelf at room temperature
for weeks or months. They do not deteriorate quickly.

Developing Standards & Standard
Establishing control over purchasing ensure a continuing
supply of sufficient quantities of the necessary foods,
with each of quality appropriate to its intended use and
purchase at the most favorable price.
Standard must be develop for:
1. The quality of food purchased
2. The quantity of food purchased
3. The price at which food is purchased

Establishing Quality Standards

It is important first to determine which perishable &

non-perishable food is required in order to produce
products of consistent quality.
Thus it is important to draw up the list of all food
items to be purchased, including those specific and
distinctive characteristic that best describe the desired
quality of each in written description also known as
standard purchase specifications.
It is usually base on federal grading or common
market grading.

Establishing Quality Standards
Through Standard Purchasing Specification :
1. To determine exact requirement in advance for any
2. To purchased according to specification to prepare
several different items on the menu.
3. They eliminate misunderstanding
4. To have standard competitive bidding
5. They eliminate for detail verbal description
6. To facilitate checking food as it is received.

Establishing Quantity Standard

Quantity standard for purchasing are subjected to

continual review and revision, often on a daily basis.
Perishable Item .The correct amount must be
purchased to avoid wastage.
A basic requirement of the purchasing routine is to
take daily inventory of perishable.
The routine requires that determinations be made of
anticipate total needs for each item, base on future
menus and often on experience as well.

Establishing Quantity Standard
Non-perishable items does not present the problem of
rapid deterioration, the do represent considerable amount
of money invested in material in storage. The goal here is
to avoid excessive quantities on hand. Through proper

The ways to maintain inventories of non perishables at

appropriate levels, most are variations on two basic
1. Periodic order method
2. Perpetual inventory method

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
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

Perpetual Inventory Method

1. To ensure that quantity purchase are sufficient not excessive
2. To provide effective control on stored item for the future.
The reorder point is quite simply the number of units to which
the supply on hand should decrease before additional orders are
The Par Stock means simply the maximum quantity of a given
item that should be on hand. This helps to
1. Storage space
2. Limits on total value of inventory
3. Desired frequency of ordering
4. Usage
5. Purveyors minimum order requirements

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
The availability of sources of supply varies considerably from one location to another.
It depends on ownership policy, availability of supplies and general market condition,
supplies can be choose from:
Local producers
Local farms
Cooperative association

Perishable because prices for perishable often fluctuate daily it is necessary to find the
price from different supplier through telephones.

Non-Perishable normally with fewer suppliers with lowest price and consistent quality,
small quantity & delivery wise.

Centralized Purchasing
This is usually used in chain operations and occasionally established by small groups
of independent operator with similar needs/
Purchased at lowest price because of volume
Desired quality as agent has greater choice
Obtain exact specification
Larger inventory ensuring reliable supply
Dishonest greatly reduced.
Little freedom for its particular needs
No advantage on local specials at reduce price
Limiting changes of menu.

Food Receiving Control
The primary objective of receiving control is to verify that quantities, qualities
and price of food delivered conform to orders placed.
The person that usually responsible for this job is given the job title as
receiving clerk.

Establishing standard for receiving

Established standards to govern the receiving process are:
The quantity delivered should be the same as the quantity listed on order forms
and also should be identical as the quantity listed on the invoice or delivery bill.
The quality of item delivered should conform to the establishments standard
purchase specification for that item
The prices on the invoice should be the same as those stated on the order form

Establishing standard for receiving
A bill from a vendor for good or services, often presented as the goods are
delivered or the services performed.

INVOICE. Gunasemula Company. 230 Kampung Saya

To: The Sugar & Spice Caf
Jalan Haji Taha. Date: June 12th

Quantity Unit Description Unit Price Amount

30 biji Durian 8.50 255.00
10 kg Striploin 12.35 123.50

Received By:___________________ Date: ___________

Establishing Standard Procedures for receiving

Example of Standard procedure for receiving

1. Verify that the quantity, quality and price for each item delivered
conforms exactly to the order place
2. Acknowledge that quantity, quality and price have been verified
by stamping the invoice with the rubber invoice stamp provided
for that purpose
3. List all invoices for foods delivered on a given day on the
Receiving Clerks Daily Report for that day, and complete the
report as required, or enter appropriate information directly into
a computer terminal
4. Forward complete paperwork to proper personnel
5. Move food to appropriate storage areas.

Establishing Standard Procedures for receiving

rubber stamp used by a receiver to overprint a small form on an
invoice for the purpose of recording the data on which goods
were received, as well as the signature of the several
individuals verifying the accuracy of data on the invoice.
1. Verification of the date on which food was received
2. The signature of the clerk receiving the food who vouches for
the accuracy of quantity, quality and price.
3. The stewards signature, indicating that the steward knows the
food has been delivered
4. The food controllers verification of the arithmetical accuracy of
the bill.
5. Signatory approval of the bill for payment by an authorized
individual before a check is drawn.
Sample of a Invoice Stamp


Received by:
(Receiving Clerk)

Price and Extensions Verified:

(F & B Cost Controller)

OK for Payment:
(Account Department)
Listing Invoices on Receiving Clerks Daily Report
Receiving Clerks daily Report is an important accounting
Food is divided into at least two categories:
Item Purchase for immediate use direct (extremely
perishable nature that are purchased more or less daily basis for
immediate use) and will become the cost immediately.
Item Purchase to be kept in inventory store (Meat, cans,
bottles and boxed) and will become the cost when the item is
issued for production.
The Receiving Clerks Daily Report is prepared by receiving clerk,
who merely copies data from each invoice to appropriate columns
on the reported and then enters the total for each invoice into
one of the three columns under the general heading Purchase
Journal Distribution Food Direct, Food Stores or
Receiving Clerks Daily Report
Receiving Clerks Daily Report No. 1
Date: June 11, xxxx

Purchase Journal Distribution

Direct Food Sundries

Unit Total
QTY Unit Description Price Amount Amount Food Stores

Market Price Meats

30 lbs Strip Steak 7.95 238.50

10 lbs Breast of veal 4.65 46.50

285.00 285.00

Jongs Farm
10 kg Crocodile Meat 2.50 25.00 25.00 25.00

Kau Pun Farm

1 Kg Daun Kucai 5.00 5.00

2 Bdl Pucuk Paku 2.00 4.00

9.00 9.00

319.00 319.00 9.00 310.00

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:
a. Normal usage is one case of 24 cans per week.
b. Quantity on hand is 10 cans.
c. Desired ending inventory is 16 cans.
3. 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:
a. Normal usage is one case of 12 cans per week.
b. Quantity on hand is 6 cans.
c. Desired ending inventory is 18 cans.
d. 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:
a. Normal usage is 21 cans per week.
b. It takes four days to get delivery of the item.
c. Par stock is set at 42 cans.
d. 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:
a. Normal usage is two cans per day.
b. It takes five days to get delivery of the item.
c. Par stock is 29 cans.
d. Cans come packed six to a case.

Food Storing & Issuing Control

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

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 1C)
Frozen foods: 10 0 F (-23 to -18C)
Factor 1. Condition of facilities and
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
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

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

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 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
Clerks 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.
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.

The Requisition Form

Requisition Form Date: 9th Mar 2XXX

Department: Main Kitchen
Quantity Description Unit Cost Total Cost

6 #10 Cans Green Peas $2.79 $16.74

50 Lbs. Sugar 0.39 19.50
40 Lbs. Ground Beef 2.59 103.60
6 Loin Pork (108 lbs. per tag) 3.39 258.12

TOTAL $397.96
Charge to: FOOD Department

Requested by
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.


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

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
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

Quantity x Yield percentage

Number of portions =
Portion size

Quantity x Yield percentage

Portion size =
Number of portions

Yield percentage = Number of portions x Portion size



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
This topic will look into the planning of how many is enough when producing. The
quantity of each production will also need to be control as to help in reducing
excessive cost though wastage if overproduction or customer dissatisfaction if it is
Factor need to be considered are:
1. Maintaining sales history
2. Forecasting portion sales
3. Determining production 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 entre 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
Popularity index = portion sales X 100
Total portion sales for all menu items

188 X100
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
It is a principal element in cost control as accurate
prediction will make purchasing and production more
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 managements 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
DAY : Tuesday DATE : 7 Feb 20xx MEAL : Dinner

Menu Forecast Adjusted Portion Production Portions Needed Total Left

item forecast size Method on Hand Production Available over

L 75 80 6 oz. Recipe#62 - 80 80 0

M 60 65 8 oz. Recipe#4 5 60 65 5

N 20 20 4 oz. Recipe#19 - 20 20 0

O 150 165 12 oz. Grill 20 145 165 6

Total 305 330

Sale Forecast Vs Actual Sales
DAY : Wednesday DATE : 8 Feb 20XX MEAL : Dinner

Item Sales Forecast Actual Sales Difference

L 80 85 +5
M 65 60 -5
N 20 20 -0-
O 165 159 -6
Total 330 324 -6

The purpose of monitoring quantity production:

1. To determine whether the sales forecast has been reasonably accurate in predicting both the
total number of customers and their individual preferences for particular menu item
2. To judge how closely the chef has followed the production standards established on the
production sheet.

Void Sheet
DAY : Tuesday DATE : 7 Feb 20XX
Check # Waiter # Item Reason for Return Authorization Sales value

11031 6 O Too well done SJC 7.95

11034 6 M Dropped on floor SJC 6.95
11206 4 O Too well done SJC 7.95
11227 3 O Too well done SJC 7.95

Void Sheet is to record all the sale that are not being done because of the reasons stated. The
return on each of the item must be authorized by the supervisor or the manager in charge.

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
Item Opening Portion Additional Total Available Closing Portions consumed
Inventory Prepared Preparation Inventory

AB - 180 180 15 165

BH 5 60 65 5 60
CJ - 110 10 120 14 106
DZ 20 145 165 8 157
Item Portion Sold Portion Void Total Consumed Difference Comment
(From Above)

AB 165 - 165 165

BH 58 2 60 60
CJ 103 1 104 106 2 2 missing check
DZ 156 1 157 157
PREPARED BY:_____________________ REVIEWED BY _______________
Food Controller Manager

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

Adjustment of Cost of Food Issued
Intra-Unit (Cooking Liquor/Food to Bar-Direct)
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 Cost of Food Issued

=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 Cost of Food Consumed

- 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 Management Report
- Food to Bar (Directs)
- Transfer to Other Units 1. Frequency
- Grease Sales
- Steward Sales 2. Timelines
- 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 =

Total Inventory

Food Cost
Average Inventory


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

Food Cost Food cost to date

= Food Cost % = Food cost % to date
Food sales Food sales to date

Food Inventory

Food Cost %

To Date
To Date
Total Sales

Daily Cumulative Cost Record

To Date
Total Cost

Food to Beverage

Beverage to Food

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

Description Today Same Day To Date
Report to Management
Last Week
This Week Last Week

Food Sales $3,600 $2,000 $15,750 $12,600

Food Cost $745 $300 $4,990 $4,200
Food Cost % 20.7% 15.0% 31.7% 33.3%

Cost Breakdown

Direct $80 $90 $2,170 $1,665

Store $665 $210 $2,800 $2,495
Meat $525 $105 $2,115 $1,765
Groceries $140 $105 $685 $820

Daily Food Cost Report
Day: Saturday Date: OCT 20 20xx REF:waq12
Description Today This Week To Date Same Week, Last Month

Food Sales 3,600 15,750 12,600

Food Cost 745 4,990 4,200
Food Cost % 20.7% 31.7% 33.3%
Item Vegetable Fruits Dairy Bakery Total Direct
This Week 850 575 505 240 2,170 13.8%
Last Week 675 450 325 215 1,665 13.2%
Item Beef Poultry Provisi Other Total Meat Total Store
This Week 1,100 960 230 95 2,115 13.4% 687 4.3%
Last Week 925 465 245 80 1,675 13.3% 820 6.5%
Item Cooking liquor Food to bar (Directs)

This Week 165 145

Last Week 95 45


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
2. Maximizing profit Pricing
3. Controlling revenue.(Proper control of the revenue received)


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
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
Price Sensitivity
Factors to consider
Pricing Policies

1. Matching Competitors price

2. Calculating desired contribution margins to portion cost
3. Adding desired contribution margins to portion cost

Maximizing Profit
2. Selling those products effectively.
The menu
Layout and design
Item arrangement and location
Descriptive language
Kitchen personnel and equipment
Sales Techniques
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

Menu No. sold Menu Item Item Item CM Menu Menu Menu CM CM MM Menu
item (MM) mix% food cost sales (E-D) Cost Rvenu (F*B) CAT CAT item
name price (D*B) (E*B) Classifi











COL 100%

K = I/J O = M/N Q = (1/no.of item) x 70%


Beverage Production Control
To ensure that all drinks are prepared accordingly to
managements specifications
To guard against excessive costs that can develop in the
production process

Establishing Standards and Standard procedures for
Standard must be established for the:
Quantity of the ingredients used
Proportion of the ingredients used
Drink 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. Devices for Measuring Standard Quantities
Four measuring devices are commonly used by bartenders:
Shot Glasses (Plain and lined)
Jiggers (Double ended stainless steel Measuring device that
resembles the shot glass)
The pourer (Fitted on top of a bottle)
The 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 ones 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
Ounce-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.