Chapter 2
The Control Process
Principles of Food, Beverage, and Labor Cost
Controls, Ninth Edition
Important Control Definitions
Control: Process used by managers to direct, regulate
and restrain the actions of people so that the
established goals of an enterprise may be achieved
Cost Control: Process used by managers to regulate
costs and guard against excessive costs
Standards:Rules or measures established for making
comparisons and judgments
Standard cost: Cost of goods and services identified,
approved and accepted by management
Important Control Definitions
Standard procedures: Procedures that have been
established as the correct methods, routines and
techniques for day-to-day operations
Budget: Realistic expression of management’s goals
and objectives expressed in financial terms
Control system: Collection of interrelated and
interdependent control techniques and procedures in
use in a given food and beverage operation
Cost/benefit ratio
The cost/benefit ratio is the relationship between the
costs incurred in instituting and maintaining a single
control or control system, and the benefits or savings
derived by doing so. Benefits must always exceed
costs. Before instituting any new procedures for
control, management should first determine that the
anticipated savings will be greater than the cost of
the new procedures.
Control techniques available to a manager
include the following.
- Establishing standards
- Establishing procedures
- Training
- Setting examples
- Observing and correcting employee actions
- Requiring records and reports
- Disciplining employees
- Preparing and following budgets
The control process consists of four steps.
1. Establish standards and standard procedures for
operation.
2. Train all individuals to follow established standards
and standard procedures.
3. Monitor performance and compare actual
performances with established standards.
4. Take appropriate action to correct deviations from
standards.
Additional Terms
Control process
Flexible budget
Operating budget
Procedures
Quality standards
Quantity standards
Sales control
Static budget
The Budget
▪The budget, or financial plan, will detail the
operational direction of your unit and your
expected financial results.
▪The budget should not be a static document.
It should be modified and fine-tuned as
managerial accounting presents data about
sales and costs that affect the direction of the
overall operation.
▪Just as the P&L tells you about your past
performance, the budget is developed to help you
achieve your future goals.
Budgeted Revenue - Budgeted Expense = Budgeted Profit
▪To prepare the budget and stay within it assures
you predetermined profit levels.
▪The effective foodservice operator builds his or
her budget, monitors it closely, modifies it when
necessary, and achieves the desired results.
Developing the Budget
To establish any type of budget, you need to have the
following information available:
1. Prior period operating results
2. Examine the external environment to assess any
conditions that could affect sales volume in the coming
year
3. Review any planned changes in the operation that
would affect sales volume
4. Determine the nature and extent of changes in cost
levels
5. Have the projections for sales, costs and profits
approved by management
Monitoring the Budget
▪In general, the budget should be monitored
in each of the following three areas:
1. Revenue
2. Expense
3. Profit
▪ As business conditions change, changes in the budget
are to be expected. This is because budgets are based
on a specific set of assumptions, and as these
assumptions change, so too does the budget that
follows from the assumptions.
▪ Budgeted profit must be realized if the operation is to
provide adequate returns for owner and investor.
▪ The primary goal of management is to generate the
profits necessary for the successful continuation of the
business. Budgeting for these profits is a fundamental
step in the process.
© John Wiley & Sons, Inc. 2009