Chapter 7: Cost Control Flashcards
q1as a management function, deals with the measurement of current performance and guidance towards some predetermined goals
control
a process of making actual costs conform to a standard
cost control
defined as the prediction of the amount of money needed for a specific period of time
budget
type of budget
overall financial budget
ex: balance sheet, income statement
master budget
type of budget
forecast of sales activity and an estimate of costs that will be incurred in generating those sales
includes: revenues, expenses, changes in inventory, and other working capital items
operating budget
type of budget
based on set, predetermined level of activity or transactions
fixed budget
type of budget
reflects variability in performance activities
flexible budget
type of budget
identifies amount of cash on hand at any given time
cash budget
type of budget
allocates funds bases on efficiency and necessity rather than budget history
cash budget
type of budget
allocates funds bases on efficiency and necessity rather than budget history
zero-based budget
type of budget
predict costs of capital expenditures of long-term plan used to estimate
includes equipment replacement, renovation projects, and facility expansion
capital budget
pertains to resources expended in order to achieve an objective
cost
elements of cost are (3)
raw materials
labor
overhead
cost
expired, consumed, or utilized costs
expenses
cost
unaffected by change in business volume
fixed cost
cost
affected by change in business volume
variable cost
cost
affected by short-term plans and operational objectives
controllable cost
does not easily change over time, fixed cost
untcontrollable cost
cost
cost of goods and services agreed upon by the management
standard cost
cost
incurred costs of operation
actual cost
cost
can be traced directly to the product
direct cost
cost
cannot be traced directly on the product
indirect cost
cost
legitimate business cost
any activity that increases the variable cost or unexpectedly reduces sale that can reduce profit
hidden cost
defined as a set of rules or measures established in order to make comparisons and judgments
setting standards
setting standards
defines the degree of acceptability of inputs, finished products, and work performance
quality
setting standards
degree of acceptability based on weight, count, or volume
quantity
setting standards
must be accurately determined to determine effectiveness of the operations
cost
established methods and techniques for routine operations
procedures
procedures established by the management must be followed for standardization purposes
training
involves monitoring performance, discipling employees, and taking appropriate actions to correct deviations from standards
effective supervision and leadership
provide information for decision-making
records and reports
involves setting basic policy decisions
pre-operational control
pre-operational control
concerned with the profitability of the company
financial policy
pre-operational control
provision of satisfactory standards for the F&B according to target market, type of menu, methods of purchasing, food quality, type of service, and facilities design
catering policy
involves built-in checks and technological and operational procedures covering the different stages of foodservice activities
operational control
involves cost reporting, assessment of results, and taking corrective actions
post operational control
percentage of total sales spent on food products
food cost
cost distribution based on % of sales:
40-45%
food costs
cost distribution based on % of sales:
30-35%
labor costs
cost distribution based on % of sales:
10-15%
other expenses
80-95%
total
production control
the prediction of food needs for a day or other specific period of time
based on historical data
forecasting
production control
measurable statements of aesthetic characteristics of food items
basis for sensory analysis of the prepared products
quality standards
production control
yield percentage or yield factor is sued to determine how much of the food is lost as a result of processing
yield test
production control - yield test
used to determine standard portion costs of meat items portioned before cooking
butcher test
production control - yield test
used for items to be divided into portions after cooking to get portion cost
cooking loss test
portion control
quantity of any item that is to be served each time that item is prepared or ordered
size per serving
formula: standard portion size = total weight of the product / no. of portions per unit
standard portion size
portion control
calculated or planned cost
amount that a standard portion should cost given the standards and standard procedures for its production
standard portion cost = purchase price per unit/no. of portions per unit
standard portion cost
done based on product, clientele, competitor, and supply vs demand
menu pricing
menu pricing - cost-based pricing
cost of food + direct labor
prime cost
menu pricing - cost-based pricing
overall cost + desired profit
average cost-plus profit
menu pricing - cost-based pricing
includes profit percent
all cost-plus profit
menu pricing - cost-based pricing
based on minimum charge
minimum sale pricing
menu pricing - non-cost-based pricing
based on competitor’s price
competition pricing
menu pricing - non-cost-based pricing
based on intuition, competitor’s pricing, or “follow the leader” pricing
traditional pricing
labor cost formula
labor cost % = (labor cost/total sales) x 100
costs other than food and labor
operating/overhead cost
operating/overhead cost
utilities, laundry, repairs and maintenance, replacement, phone water, electricity, office supplies, and cleaning materials
operating costs
operating/overhead cost
depreciation, rent or amortization, insurance, and taxes
fixed costs
