N C H M C T N AT I O N A L C O U N C I L FO R H OT E L M A N AG E M E N T & CAT E R I N G T EC H N O LO GY

Unit 1: Revenue Control

Exam-Oriented Question Bank (Short & Long Answers)

Section A: Short Answer Type Questions

Q1. Define the term 'cost' in the context of a food and beverage operation.

Cost is the total amount of money spent on the production and sale of a product. In a food and
beverage outlet, it comprises material costs, labor costs, overhead costs, and other related
operational expenses.

Q2. What is the formula used to determine material cost?

The material (food) cost is calculated by accounting for opening stock, additional purchases, staff
meals, and closing stock:

Opening Stock + (Purchases − Staff Meals) − Closing Stock = Material Cost

Note: Employee meals are explicitly subtracted from material cost and added to labor cost.

Q3. How do you calculate the labor cost percentage of sales?

It is determined by comparing the total expenditure on labor against the total sales volume over
a specific time frame using the formula:

Labor Cost % of Sales = (Total Labor Cost / Total Sales) × 100

Q4. Differentiate between Fixed Costs and Variable Costs.

• Fixed Costs: These costs remain completely or substantially unchanged irrespective of the
volume of sales (e.g., rent, insurance, loan repayments). They accrue with the passage of time
and are referred to as "period costs".
• Variable Costs: These costs change directly in accordance with the establishment's output or
sales volume (e.g., raw food and beverage costs). They increase as sales increase.

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Q5. What is a Duty Roster and what is its main objective?

A duty roster is a structural format or schedule that shows the allocation of service duties to a
team of staff members across different shifts of the day (prepared weekly or fortnightly). Its
main objective is to ensure that all necessary tasks are covered and assigned so that service runs
effectively, while ensuring fair rotation of shifts and days off.

Q6. Define 'Work Production Standard'.

A work production standard is the defined quantity of work that an employee with a particular
type of job is expected to complete (e.g., a coffee shop waiter handling 20–24 covers). It serves as
an objective benchmark to evaluate individual productivity and measure deviations.

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 Section B: Long Answer Type Questions

Q1. Give a detailed classification of costs based on their behaviour and traceability as
explained in the curriculum.

Costs in a food and beverage establishment are systematically analyzed and classified under two
major distinct categories:
1. Classification on the Basis of Behaviour (Response to Sales Volume)

• Fixed Cost: Expenses that remain static regardless of changing sales volume, accruing strictly
based on time (e.g., lease payments, insurance premium).
• Variable Cost: Costs that fluctuate in direct proportion to production output or sales levels
(e.g., food ingredients, beverage stock).
• Semi-Fixed Cost: Expenses that alter in aggregation with sales volume, but not in strict
mathematical proportion (e.g., electricity, production gas).
• Total Cost: The grand sum of fixed, semi-fixed, and variable expenses combined.
2. Classification on the Basis of Traceability (Allocation to Objects)

• Direct Cost: Expenses easily recognized and linked explicitly to a specific finished product.
◦ Direct Material Cost: Clear physical elements identifiable in the final good (e.g., wood in
furniture).
◦ Direct Labor Cost: Wages paid directly to workforce engaged in producing the product.
◦ Direct Expenses: Additional isolated expenses clearly spent on a single product unit.
• Indirect Cost: Overhead expenses that are difficult to trace to a standalone unit and must be
allocated across the operation.
◦ Indirect Material Cost: Auxiliary materials utilized that cannot be cleanly attributed to a
specific component.
◦ Indirect Labor Cost: Compensation for workers not directly producing items (e.g.,
management, supervisors).
◦ Indirect Expenses: Broad operational overheads that cannot be fully assigned to a specific
cost unit.

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Q2. What are the critical operational factors that must be considered when establishing
staffing guidelines for a food and beverage outlet?

Determining accurate staffing levels is complex. Inadequate staffing leads to severe customer
dissatisfaction and employee burnout, whereas overstaffing directly deflates profit margins. The
guidelines must carefully evaluate:
• Establishment Matrix: The category of the hotel or restaurant, along with the physical size
and total cover capacity.
• Service Styles: The complexity of the chosen food and beverage service design (e.g., fine
dining vs. coffee shop).
• Productivity & Skill Levels: The specialized training, experience, and speed capabilities of
the workforce.
• Market Dynamics: Localized labor cost structures relative to the specific city of operation.
• Infrastructure Support: The modern technical quality and operational type of kitchen and
service equipment.
• Legal Frameworks: Strict adherence to prevailing state labor laws and corporate operational
frameworks.
• Business Forecasting: Aligning staff strength with projected sales volume shifts, seasonal
menu revisions, or restaurant structural expansions.

Q3. Explain the concept of Labor Cost Analysis and outline how management utilizes
business forecasting to modify schedules.

Concept and Critical Importance

Labor cost analysis is the systematic examination and evaluation of all capital spent on staff
procurement and employee compensation—encompassing base salaries, daily wages, benefits,
taxes, uniforms, and transport. Because labor represents one of the largest operational outflows
in the hospitality sector, this analysis is critical for ensuring optimum resource allocation,
maintaining legal compliance, and establishing whether payroll spends are excessive or
underperforming.
Schedule Modification via Business Forecasting

To prevent fixed payroll budgets from disregarding shifts in actual demand, managers utilize
proactive business forecasting. This coordinates scheduled staff hours tightly with projected
guest covers and business volume rather than rigid timetables. Management applies two key
practical methodologies:

1. Cross-Utilization of Employees: Training and deploying workers fluidly across different

departmental roles to maximize operational flexibility and lower external hiring costs.
2. Volume-Based Hours Adjustment: Modifying individual employee hours up or down
dynamically in accordance with seasonal trends, localized holiday spikes, or special
banquet events, protecting both service standards and profitability.

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