Chapter 1 _INTRODUCTION in F&B cost control
- 1. At the end of this chapter, student are able to: 1. Explain the attributes which support the understanding of food and beverage cost control in food operation accurately (C2) PREPARED BY: NOORSABRINA M SALBI, JPH, PIS
- 2. Introduction Definition of control: Control is the process which managers direct, control and prevent the actions of people in order to achieve desired goals Goals are: financial success preserving the environment promoting better health
- 3. WHAT & WHY? All the way of the process include raw materials purchased, received, stored and issued for the purpose of preparing products for sale Keep cost within acceptable bounds, to account for revenues properly and make profit
- 4. Definition of cost control: The process which manager control costs and guard against excessive cost in known as cost control By control purchasing, receiving, storing, issuing and preparing food and beverages for sale, as well as scheduling the personnel involved
- 5. Causes of excessive cost: Inefficiency For example storing food in refrigerators that are not cold enough will lead to spoilage and hence to excessive cost. Waste For example: preparation of an inedible beef stew or undrinkable juice
- 6. Type of Cost Prime cost Food cost + beverages cost + labor cost Actual Cost The cost that actually was RECORDED. For example, the payroll records. Budgeted Cost The cost expected to be for a period of time. Example: budget for labor cost for a month. Controlled cost The cost that can be changed in the short term. Exp; advertising, promotions, utilities, repairs, etc Non-controlled Cost The cost that CANNOT be changed in the short term. Exp: depreciation, and taxes.
- 7. Fixed cost The cost that unaffected by changes in sales volume. Examples: rent, utilities, insurance Variable cost The cost related/ depend on business volume. Exp: food and beverages cost. i. Directly variable cost – Food and beverage cost where it linked to volume of business. ii. Semi variable cost – Cost has both the fixed element and variable element. Example like payroll cost (salaries, wages and employees benefit for part time and permanent worker).
- 8. Direct cost Cost that borne by certain department. Examples food & beverage cost by F&B Department; linen & laundry cost by housekeeping department Indirect cost The cost that share by all department. Example like service cost, utilities cost. Historical cost The figures that have already happened and can be found in business records. Planned cost Cost made by using historical costs in the present to determine what likely to happen in future. These numbers also used in budgeting
- 9. Unit cost Food and beverage portions cost for the purpose of establishing menu prices and unit profitability. Example: cost of one steak and cost of unit of work. Total cost Cost of all food served in one period which normally used to determine total sales. Example: cost of strip loins to make steaks.
- 10. CYCLE OF FOOD CONTROL
- 11. Cycle of food control Systematic process flow to control cost base on previous record data. Operation analysis: General/ overall analysis on business practice. Menu: The important ‘sales tool’ where all the decision making must base on menu. Purchasing: To make sure that supplies, equipment and services are available to the operation in quantities appropriate to predetermine standards at the right price and at optimum cost to meet desired standard
- 12. Receiving: Activity ensure product delivered as ordered and in good condition. Storeroom: Activity holding of goods under proper conditions to ensure quality until time of use. Example; FIFO Food preparation: Establish best procedure in food preparation to prevent waste and inefficient Services: Determine best type of service that suitable for business and all staff are trained (fast food, drive thru, fine dining, buffet)
- 13. Selling & control of cash: Procedure for cashier to followed and cash management until cash deposited. Sales analysis: Analysis on sales performance for future planning of sales. Example: What kind of dish had high sales and low sales? What that happen? How we can maintain or improve? Start again: Cost control is never ending process. After all data and information collected, reassessment of cost control again whether had achieve standard or still need improvement
- 14. Management Action Positive action: Decision to TAKE ACTION base on collected data. Example: Decision to change the supplier because of the high price/ to trained staff because got complain from customer. Passive action: Decision to NOT TAKE ACTION base on collected data. Example: Decision to maintain supplier because it provide good price and raw material. ###Data needed to be analyzed are depend on size of business
- 15. Control Technique 1. Establish standard Standard: Rules or measures established for making comparisons and judgement. Quality standard: Degree of excellence of raw materials, finished products, and works. Is the grading process. Exp: Beef grades Quantity standard: Measures of weight, count, or volume are used to make comparisons and judgement. Exp: portion of food. Standard cost: The cost of goods or services identified, approved, and accepted by management.
- 16. 2. Establish Procedures Procedure: The methods employed to prepare products or perform jobs. Standard procedure: Establish procedures as the correct methods, routines and techniques for day to day operations. Exp: SOP for Moist chocolate cake preparation 3. Training Process by which managers teach employees how work to be done, given the standards and standards procedures established so all staff aware and trained to do jobs.
- 17. 4. Setting examples Informally way to establish standards Employees in an operation follow the examples set by the manager-the manager behavior, manner, responses to questions and even a failure to speak or action in some situations. 5. Observing and correcting employee actions Manager observe the actions of all employees continually, manager responsibility to correct their performance if they are failing to follow the standards. 6. Requiring records and reports Managers need timely information to determine whether primary goals and subgoals are being met.
- 18. 7. Disciplining Employees To change or modify employees job performance or personnel behavior To improve performance so that the work is done in conformance with the standards Procedures that management has identified as those most likely to achieve the organization goals and objective 8. Preparing and following budget Budget: Financial plan/ realistic expression of management goals & objectives expressed in financial term Type: Operating budget Sales budget Cash flow budget Capital equipment budget