food and bverage cost controls

FOOD AND BEVERAGE
COST CONTROL
CHEF ASHOKKUMAR

INTRODUCTION
2
•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
3
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
concepts.
4. Describe the significance of cost - to - sales relationships and identify several
cost - to - sales ratios important in food and beverage management.
5. Identify the formulas used to compute cost percent and sales price.
6. Describe factors that cause industry wide variations in cost percentages.
7. Explain the value of comparing current cost - to - sales ratios with those for
previous periods.

COST CONCEPTS
4
•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 monthly)

COST CONCEPT
5
•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 services.
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
6
•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 correspondingly.
•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
7
CONTROLLABLE AND NON-CONTROLLABLE COST
•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
Expenses.
•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 Depreciation.

COST CONCEPT
8
•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
9
•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
10
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
11
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
12
•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 performance.
By Seat. Usually for a year period. Total Dollar sales divided by the
number of seats in the restaurant.

MONETARY TERMS
13
•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 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 Yasser
= $565 ÷ 30
= $18.83

NON-MONETARY TERMS
15
•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 by dividing the total number of covers 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
16
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 category.
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
18
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%

19
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

20
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

TUTORIAL
21
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

TUTORIAL
22
4. Sales records for a luncheon in the Zalika’s 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

TUTORIAL
23
6. The following table indicates the number of covers served and the gross
sales per server for one three - hour period in Asyikin’s Restaurant.
Determine: (a) the average number of covers served per hour per
server
(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 Asyikin’s 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.

FOOD AND BEVERAGE COST
CONTROL
THE CONTROL PROCESS

THE CONTROL PROCESS
25
Introduction
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 information.
•Food are not consumed by pest unless made available by human
•Customer seldom leave without paying unless make possible.

MANAGING INCOME & EXPENSES
26
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 oriented
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
27
INCOME
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.
EXPENSES
There are four major expense categories that must be controlled by
management. They are…
FOOD COST, BEVERAGE COST, LABOR COST & OTHER EXPENSES

THE CONTROL PROCESS
28
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
29
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 establishment.
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
30
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
31
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 performed.
• 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 possible.

32
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 operations.
Example:
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.

3. Training
Training is a process by which managers teach employees how
work is to be done, given the standards and standards procedures
established.
Example;
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.

34
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 situations.
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 evident.
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.

35
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 manager’s
responsibility to correct their performance to the extent necessary at the
appropriate time.

36
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.
Example;
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.

37
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.

38
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 management’s 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 sales.

PREPARING AN OPERATING
BUDGET
39
PREPARING AN OPERATING BUDGET
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 budget.
Flexible budget normally prepared for levels of business volume above and
below the expected level. (See Illustration)

40
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%
COST OF SALES
Food 275,187 35.0%
Beverage 34,688 25.0%
Total Cost of Sales 309,875 33.5%
GROSS PROFIT 615,125 66.5%
CONTROLLABLE EXPENSES
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%
INCOME BEFORE FIXED EXPENSES 245,125 26.5%
OCCUPANCY COST 78,625 8.5%
INTEREST EXPENSES 13,875 1.5%
DEPRECIATION 46,250 5.0%
RESTAURANT PROFIT/LOSS 106,375 11.5%

THE CONTROL PROCESS
41
Consist of the following four steps:
1. Establish standard and standard procedures for operation.
2. Train all individual to follow established standards and standard
procedures.
3. Monitor performance and compare actual performance with
established standards.
4. Take appropriate actions to correct deviations from standards.

TUTORIALS
42
1. What is the purpose of cost control? Of sales control?
2. Define:
Flexible budget
Standard cost
Operating budget
Standard procedures
Procedures
Standards
Quality standards
Quantity standards
Training
Sales control
Budget
Control system
Control
Cost control

43
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

CONTROL
COST/ VOLUME/PROFIT RELATIONSHIP

COST/VOLUME/PROFIT
RELATIONSHIP
45
Introduction
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 profit.
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 + profit.

COST/VOLUME/PROFIT RELATIONSHIP
46
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
47
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 decrease.
3. Once acceptable levels are determined for costs, they must be controlled if
the operation is to be profitable.

COST OF SALES
Food 96,678.00
Beverage 12,188.00
PAYROLL 81259.00
OTHER CONTROLLABLE EXPENSES 46,750.00
OCCUPANCY COST 29,500.00
INTEREST EXPENSES 5,000.00
DEPRECIATION 16,250.00
FIXED AND VARIABLE COST

S=VC+FC+P
49
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% fixed.
Food Cost $96,678.00
Beverage Cost 12,188.00
Variable labor Cost (40%) 32,503.60
Total Variable Cost 141,369.60

S=VC+FC+P
50
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 is:
S=VC(141,369.60)+FC(146,255.40)+P(37,375)
S=$325,000.00

VARIABLE RATE & CONTRIBUTION
RATE
51
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)
VR=.435
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.

52
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
VARIABLE RATE & CONTRIBUTION
RATE

BREAK EVEN POINT
53
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
54
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.
Fixed Cost + Profit
Contribution Rate
S= FC + P
CR
146,250 + 37,375
.565
Sales = 325,000
Sales =

CALCULATE BREAK EVEN POINT
55
By using the same formula, we can actually can determine the Breakeven
point, a which profit would be equal to zero dollar
Sales = $146,250 + 0
.565
S =
FC + P
CR
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
(S)$258,850 = (VC)$112,600 + (FC)$146,250 +(P)$0.00

BREAK EVEN ANALYSIS
56
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 = S X VR
(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
57
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
58
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 analysis
5. The sales mix in the restaurant will also remain relatively constant for
the period.

CVP ANALYSIS
59
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
60
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)
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
S =
FC + P
1 - VR (or CR)

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 indicated
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 costs
NUMBER OF CUSTOMER TO BREAK
EVEN

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 sales:
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 margin:
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, .55
TUTORIALS

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
TUTORIALS

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 customers:
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
TUTORIALS

Food Costs 188,625
Variable Labor Costs 61,200
Occupancy Costs 55,500
Interest 20,025
Depreciation 33,750
Beverage Costs 42,750
Fixed Labor Costs 85,575
Other Controllable Expenses 76,500
a) What is the establishment’s profit or loss if sales are 595500?
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 75000
f) If the establishment operated at a loss of 33375 last year, what was its level of dollar sales?
TUTORIALS

CONTROL
FOOD PURCHASING AND RECEIVING CONTROL

FOOD PURCHASING CONTROL
68
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
69
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
PROCEDURES
70
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
71
•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
72
Through Standard Purchasing Specification :
1. To determine exact requirement in advance for any products
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
73
•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.

STANDARD
74
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 planning.
The ways to maintain inventories of non perishables at appropriate levels,
most are variations on two basic methods:
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
simple:
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

STANDARD
78
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 placed.
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

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 =5 +Normal usage until delivery 10
=Reorder quantity 15
79

ESTABLISHING STANDARD FOR
PRICE
80
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:
•Wholesalers
•Local producers
•Manufactures
•Packers
•Local farms
•Retailers
•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
81
This is usually used in chain operations and occasionally established by
small groups of independent operator with similar needs/
Advantage.
•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.
Disadvantage
•Little freedom for its particular needs
•No advantage on local specials at reduce price
•Limiting changes of menu.

FOOD RECEIVING CONTROL
82
INTRODUCTION
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 establishment’s 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
83
THE INVOICE
A bill from a vendor for good or services, often presented as the
goods are delivered or the services performed.
Quantity Unit Description Unit Price Amount
30 biji Durian 8.50 255.00
10 kg Striploin 12.35 123.50
INVOICE. Gunasemula Company. 230 Kampung Saya
To: The Sugar & Spice Café
Jalan Haji Taha. Date: June 12th
Received By:___________________ Date: ___________

ESTABLISHING STANDARD PROCEDURES
FOR RECEIVING
84
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 Clerk’s
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
85
INVOICE STAMP
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 steward’s signature, indicating that the steward knows the food has
been delivered
4. The food controller’s 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
86
INVOICE STAMP Date:
Received by:
(Receiving Clerk)
Steward:
Price and Extensions Verified:
(F & B Cost Controller)
OK for Payment:
(Account Department)

LISTING INVOICES ON RECEIVING CLERK’S DAILY
REPORT
87
Receiving Clerk’s daily Report is an important accounting documents.
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 Clerk’s 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 Sundries.

RECEIVING CLERK’S DAILY REPORT
Receiving Clerk’s Daily Report No. 1
Date: June 11, xxxx
QTY Unit Description √
Unit
Price Amount
Total
Amount
Purchase Journal Distribution
Direct
Food
Food
Stores
Sundries
Market Price Meats
30 lbs Strip Steak √ 7.95 238.50
10 lbs Breast of veal √ 4.65 46.50
285.00 285.00
Jong’s 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
88

TUTORIALS
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.

TUTORIALS
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.

CONTROL
FOOD STORING & ISSUING CONTROL

STORING CONTROL:
ESTABLISHING STANDARDS AND STANDARD PROCEDURES FOR STORING
In general, the standard established for storing food should address five principal
concerns:
Condition of facilities and equipment
Arrangement of Food
Security of Storage areas
Location of Storage Facilities
Dating and pricing of stored food
92

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 humidity.
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 1°C)
Frozen foods: 10 – 0 ° F (-23 to -18°C) 93

FACTOR 1. CONDITION OF FACILITIES
AND EQUIPMENT
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
FOODSFactors involved in maintaining appropriate internal arrangement of food
include:
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.)
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 location.)
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.)
95

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 creatures
96

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.
97

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.
98

ISSUING CONTROL:
ESTABLISHING STANDARDS AND STANDARD PROCEDURES FOR ISSUING
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
99

ISSUING CONTROL: ESTABLISHING
STANDARD AND STANDARD PROCEDURE
FOR ISSUING(2)
The record keeping associated with determining the cost of the food
issued.
DIRECT
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 Clerk’s Daily Report will be
calculated directly into the particular day food cost.
100

FOR ISSUING
(2) The record keeping associated with determining the cost of the food issued.
STORES
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.
101

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.
102

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
THE REQUISITION FORM

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
104

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.
105

CONTROL
FOOD PRODUCTION CONTROL
I. PORTIONS

FOOD PRODUCTION CONTROL I.
PORTIONSThe 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
108

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.
109

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
110

NAME OF DISH/RECIPE:
REFERENCE SOURCE:
PREPARATION TIME: MINS COOKING TIME: MINS TOTAL TIME: MINS
INGREDIENT NAME REQUIRED
MEASURE
PURCHASED
QUANTITY
COST WORK IT OUT
QUANTITY WEI
GHT
/G/
ML
WEIGHT /G/ML PURCHASED QUANTITY
COST
TOT
AL
COS
T
ENTER INGREDIENTS BELOW E.G. 1/2 C, T, T E.G.
100
E.G. 500 $0.00 $0.0
0
TOTAL COST SELLING PRICE PER
SERVE
NUMBER OF SERVES PROFIT PER SERVE
COST PER SERVE % MARK-UP
STANDARD RECIPE CARD

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
112

CALCULATING STANDARD PORTION
COSTSThere 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

COSTSThere 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 .

COSTS
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 piece.

COSTS
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
percentage
118
Number of portions =
Portion size =
Yield percentage =
Quantity x Yield percentage
Portion size
Quantity x Yield percentage
Number of portions
Number of portions x Portion size
Quantity

CONTROL
FOOD PRODUCTION CONTROL
II. QUANTITIES

PROBLEMS
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.

121
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 underproduction.
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 entrée 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 mix,
Popularity index = portion sales X 100
Total portion sales for all menu items
188 X100
1937
 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 future.
It is a principal element in cost control as accurate prediction will
make purchasing and production more accurate.
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 management’s consent.
126

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.
127

PRODUCTION SHEET
PRODUCTION SHEET
DAY : TUESDAY DATE : 7 FEB 20XX MEAL : DINNER
VOLUME FORECAST: 305
MENU
ITEM
FORECAST ADJUSTED
FORECAST
PORTION
SIZE
PRODUCTION
METHOD
PORTI
ONS
ON
HAND
NEEDED
PRODUCTION
TOTAL
AVAILABLE
LEFT
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
128

SALE FORECAST VS ACTUAL
SALESDAY : 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
129
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
VOID SHEET
DAY : TUESDAY DATE : 7 FEB 20XX
CHECK # WAITER # ITEM REASON FOR
RETURN
AUTHORIZATIO
N
SALES
VALUE
11031 6 O TOO WELL DONE SJC 7.95
11034 6 M DROPPED ON FLOOR SJC 6.95
130
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.
131

PORTION INVENTORY AND
RECONCILIATION
PORTION PRODUCTION DAY: WEDNESDAY DATE: 8 FEB 20XX
ITE
M
OPENING
INVENTORY
PORTION
PREPARED
ADDITIONAL
PREPARATION
TOTAL
AVAILABLE
CLOSING
INVENTORY
PORTIONS
CONSUMED
AB - 180 180 15 165
BH 5 60 65 5 60
CJ - 110 10 120 14 106
DZ 20 145 165 8 157
SALES RECONCILIATION
ITE
M
PORTION
SOLD
PORTION
VOID
TOTAL CONSUMED
(FROM ABOVE)
DIFFERENCE COMMENT
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

CONTROL
MONITORING FOODSERVICE OPERATIONS I:
MONTHLY INVENTORY AND MONTHLY FOOD COST

INTRODUCTION
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
134

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)
135

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 chapter.
136

ADJUSTMENT OF COST OF FOOD
ISSUEDTransfer
Intra-Unit (Cooking Liquor/Food to Bar-Direct)
Inter-Unit
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)
137

DETERMINING COST OF FOOD
CONSUMEDOpening Inventory
+ Purchases
=Total Available for Sale
-Closing Inventory
=Cost of Food Issued
+ Cooking Liquor
+ Transfers from Other Units
-Food to Bar (Directs)
-Transfer to Other Units
-Gratis to Bars
-Promotion Expenses
= Cost of Food Consumed
138
Cost of Food Issued
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
139

DETERMINING COST OF FOOD SOLD
Opening Inventory
+ Purchases
=Total Available for Sale
-Closing Inventory
=Cost of Food Issued
+ Cooking Liquor
+ Transfers from Other Units
-Food to Bar (Directs)
-Transfer to Other Units
-Gratis to Bars
-Promotion Expenses
= Cost of Food Consumed
-Cost of Employees’ Meal
= Cost of FOOD SOLD
140
Management Report
1.Frequency
2.Timelines

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 =
141
Total Inventory
2
Food Cost
Average Inventory

CONTROL
MONITORING FOODSERVICE OPERATIONS II:
DAILY INVENTORY AND DAILY FOOD COST

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 required.
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.
143

DETERMINING DAILY FOOD COST
Cost of direct (from the receiving clerk’s daily report)
+ Cost of store (from requisition and meat tags, depending on the procedures followed)
+ 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
144
Food Cost
Food sales
= Food Cost %
Food cost to date
Food sales to date
= Food cost % to date

DAILY CUMULATIVE COST RECORD
DATE
DIRECTS
MEAT
STORE
ADJUSTMENT TOTAL COST TOTAL SALES FOOD COST %
FOOD
INVENTORY
BALANCE
BEVERAGETOFOOD
FOODTOBEVERAGE
TODAY
TODATE
TODAY
TODATE
TODAY
TODATE
PURCHASES
ISSUE
145

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
146

REPORT TO MANAGEMENT
Description Today Same Day
Last Week
To Date
This Week Last Week
Food Sales
Food Cost
Food Cost %
Cost Breakdown
Direct
Store
Meat
Groceries
$3,600
$745
20.7%
$80
$665
$525
$140
$2,000
$300
15.0%
$90
$210
$105
$105
$15,750
$4,990
31.7%
$2,170
$2,800
$2,115
$685
$12,600
$4,200
33.3%
$1,665
$2,495
$1,765
$820
147

DAILY FOOD COST REPORT
Day: Saturday Date: OCT 20 20xx
Description Today This Week To Date Same Week, Last Month
Food Sales
Food Cost
Food Cost %
3,600
745
20.7%
15,750
4,990
31.7%
12,600
4,200
33.3%
Item Vegetable Fruits Dairy Bakery Total Direct
This Week
Last Week
850
675
575
450
505
325
240
215
2,170
1,665
13.8%
13.2%
Item Beef Poultry Provisions Other Total Meat Total Store
This Week
Last Week
1,100
925
960
465
230
245
95
80
2,115
1,675
13.4%
13.3%
687
820
4.3%
6.5%
Item Cooking liquor Food to bar (Directs)
This Week
Last Week
165
95
145
45
148

CONTROL
MENU ENGINEERING

MENU ENGINEERING AND ANALYSIS
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.

CONTRIBUTING MARGIN
Determine the contributing margin (CM) of each item
Selling Price – Food Cost = Contributing
Margin
CM same as item’s Gross Profit
Use total food cost (include garnish, accompaniments served
with entrée such as salad, potatoes, rolls, butter etc.).

CONTRIBUTION
MARGIN
DOLLARS VS. FOOD COST
PERCENTAGE

MENU ENGINEERING
(11) Average Popularity
80% of the average item sales per entrée:
100 / 4 X 80% = 20%
(12) Popularity of each menu item:
Number of portions sold divided by total number of meals sold
Chicken: 65 / 285 = 22.8%
Beef: 75 / 285 = 26.3%
Turkey: 90 / 285 = 31.6%
Filet: 55 / 285 = 19.3%

MENU ENGINEERING ANALYSIS
100%

THE FOUR KEY MENU
CATEGORIES
Plowhorses are items that are relatively popular but have a
high contribution margin. Items in this category can have their
menu prices increased or the portion size cut in a attempt to
increase CM. If market is price resistant
Stars have both high popularity and high CM
Puzzles have relatively low popularity and high margins.
Dogs are both low in popularity and CM

THE HIGHER THE SCORE
THE MORE PROFITABLE
THE MENU
This method takes into account not only # of items sold,
but also their contributing profit

CONTROL
MENU AS A SALES TOOL

YOUR MENU IS
THE LIFEBLOOD OF YOUR
BUSINESS.
DON’T TAKE IT FOR GRANTED!
Capture customers' interest
Encourage repeat visits
Review the menu now
Profitability
Operational constraints
Labor capabilities
Current trends
Seasonal menu options
It can help to work with an
outside/objective source

HOW DO YOU CREATE A MENU THAT
CAPTURES CUSTOMERS' INTEREST?
KNOW WHO YOUR CUSTOMER IS
• Demographics
• Regional Issues
• Psychographics
• What does your customer
want
• Who is your competition
• What is the competition doing

MENU STRATEGIES AND
PRACTICES
The Menu is the #1 Merchandising Tool
Rounding Theory
Eye Gaze Patterns
Shading, Boxing, Angled Specials, Top & Bottom of a List
Price to the Consumer, Not to Formula
Branding drives Image and Value

ROUNDING THEORY
Under $5.00, guests only recognize price increments of 25¢
Above $5.00, guests only recognize price increments of 50¢ and
95¢.
Over $10.00, the incremental price point is $1.00.
Common pricing strategy - a $2.54 food cost and a 33% cost
percentage target should be priced at $7.62.
Manager lowers pricing to $7.75 from $7.95
In a year, most restaurants will serve in excess of 100,000
customers.
An extra 20¢ on just half of those customers (in pure profit)
would put an extra $10,000 to the bottom line.
Restaurant only makes $50,000, so this is a 20% increase.
Fact Based Selling!

EYE GAZE PATTERNS MAPPED
3
4
7
2
1 5
6
Customers don’t
read menus.
Customers scan
menus
The eyes follow a
predictable path
Strategically place
high-profit items
Customer spends less
than 45 seconds
scanning the menu..

SHADING, BOXING, ANGLED
SPECIALS,
TOP & BOTTOM OF LISTS
You can expect a minimum 20% increase
At the top or bottom of a list.
When you shade or box.
Patrons only scan menus.
Eye gaze motion will be drawn to variations in text, layout or
format
Combine shading, boxing and special with other forms of
merchandising

PRICE TO THE CONSUMER,
NOT TO FORMULA
Formula pricing is lazy.
A formula price leaves Money on the table.
Customers have limited knowledge of raw costs.
Set price points based on the value perception of the guest and
what the market will bear.
Use coffee as your example …
Fact Based Selling!

YOUR APPROACH TO MENU ANALYSIS
MUST HAVE A PLAN
“WHAT IS YOUR CULINARY BRAND
IDENTITY?”
Create and maintain a brand
Organization of menu / menu layout
Use a “Daily Menu” / daily specials
Maintain quality and consistency
Menu positioning

ENGINEERING MENU PROFIT
Real Time Pricing
Set menu item performance levels
-Don’t become emotionally attached
-If items don’t perform or contribute: 86 ‘em
SKU Utilization- Get Creative
Specials – your best friend (BFF)
-Steer customers to higher margin items

CONCEPTING
A “HAMBURGER” DOESN’T ALWAYS SELL
ITSELF
LESS DESCRIPTIVE
A ground beef patty with melted
cheese on a grilled bun with
bacon, lettuce and tomato
MORE DESCRIPTIVE
A fire grilled angus ground beef
patty topped with Wisconsin
cheddar cheese, Apple wood
crispy bacon, fresh lettuce and
ripe tomato slices on a toasted
Sour dough bun

MENU DESCRIPTIONS
Include ingredients: spring onions, portabella mushrooms,
etc.
Add terms to make ingredients alive: caramelized, sautéed,
basted, glazed, crispy, chunky, rich
Describe colors/temperatures/sensations: chilled, cool,
refreshing, soothing, blush, rosy, vibrant green

CONCEPTING
ACTION WORDS
Flavors (zesty, tangy, salty, etc…)
Cooking Methods (roasted, fried, caramelization, etc…)
Textures (soft, crispy, chewy, etc…)
Shape & Size (chopped, julienne, minced, etc…)
Cooking Action (drizzled, shaved, stuffed, etc…)

FOOD PLEASURE EQUATION
When you have a food choice the brain calculates how much
pleasure will be generated during the eating and digestion of
any food. EXPECTATIONS!
Goal of the brain, gut and fat cell is to maximize the pleasure
extracted from the environment in both food sensation and
macronutrient content

PLEASURE RULE #1
TASTE HEDONICS
Salt, Sugar, MSG, 5’ Nucleotides in solution yield most pleasure
Glutamates = Umami (MSG is but one)
Umami signals presence of protein
Salt + Glutamates = powerful hedonics
Emulsions –
Salt-fat: butter, salad dressings, mayo
Sugar-fat: chocolate, ice cream, cream

PLEASURE RULE #2
FOODS HIGH IN
UMAMI/GLUTAMATES
Many preferred food are naturally high in Glutamates:
Soy Sauce
Parmesan Cheese
Tomato
Potato
Sardines
Fish Sauces

PLEASURE RULE #3
TASTE HEDONICS
Salivation Response
We prefer foods that are moist or evoke saliva
Saliva is critical for solute contact with taste buds (no taste,
no pleasure)
Saliva fosters food lubrication, enhances the eating
experience
Why is there salt on crackers?
Add salt and fat (think potato chips) = perfect “salivation”
food

PLEASURE RULE #4
BALANCE THE BASICS
Balance
Acid
Sweet
Intended flavor and texture
Color
Salt

PLEASURE RULE #5
TEXTURE
About Texture
The brain has more difficulty “reading” a flavor when a food
has more texture
The brain reads temp first, then texture and finally flavor
Foods like ice cream, foie gras and risotto are sensed as richer
and more sensual

PLEASURE RULE #6
SUGAR AND FAT PLEASURE
Pleasure magnified when mixed with fat: Emulsion Pleasure
Theory
Brain Loves Emulsions with sugar/salt

CONTROL
CONTROLLING FOOD SALES

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 volume)
2.Maximizing profit Pricing
3.Controlling revenue.(Proper control of the revenue received)
181

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
182

MAXIMIZING PROFIT
There are two principal means for maximizing profits:
1. Pricing products properly
• Cost
• Price Sensitivity
• Pricing Policies
1. Matching Competitors’ price
2. Calculating desired contribution margins to portion cost
percentage
3. Adding desired contribution margins to portion cost
183
Factors to consider

MAXIMIZING PROFIT
2. Selling those products effectively.
The menu
 Layout and design
 Variety
 Item arrangement and location
 Descriptive language
 Kitchen personnel and equipment
Sales Techniques
 Up-selling
 Menu knowledge
 Costumer service
184

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
185

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.
186

CONTROL
BEVERAGE PRODUCTION CONTROL

BEVERAGE PRODUCTION CONTROL
•To ensure that all drinks are prepared accordingly to management’s
specifications
•To guard against excessive costs that can develop in the production
process
188

ESTABLISHING STANDARDS AND
STANDARD PROCEDURES FOR
PRODUCTIONStandard 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.
189

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
190

ESTABLISHING QUANTITY STANDARD
2. Glassware
191

ESTABLISHING QUALITY STANDARDS
Standard Recipes
Establishing Standard Portion Cost
Straight Drinks (formula)
Mixed Drinks and Cocktails (Detail Recipe)
192

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 one’s own bottle into the bar
Charging for drinks not served
Drinking on the job
193

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
194

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.
195

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