Chapter 1: Cost and Sales Concepts
KEY TERMS IN THIS CHAPTER
Average number of covers – The average number of covers in a given
period.
Average sale – Total dollar sales for a period divided by the number of
sales.
Average check – Average amount spent by each cover.
Average sale per server – Total dollar sales attributable to a particular
server in a given period, divided by the number of customers served.
Controllable costs – A cost that can be changed by management in the
short term. Examples include food cost, beverage cost, and labor cost.
Cost – The expense incurred for the goods or services when the goods
are consumed, or the services rendered.
Cost per dollar of sale – The cost percent expressed as a dollar figure,
or the ratio of cost to sales expressed as a dollar figure.
Cost percent – The ratio of cost to sales, expressed as a percent.
Cover – A diner; one customer who has purchased food in a restaurant,
regardless of the number of items purchased.
Directly variable costs – A cost that varies directly with sales volume,
such that every change in sales volume brings a corresponding change
in that cost.
Fixed costs – A cost that is normally unaffected by changes in sales
volume; a fixed cost does not increase or decrease significantly as
business volume changes and thus is said to have little direct
relationship to the volume of business.
Historical cost – A past cost that has been documented in business
records.
Labor costs – Payroll cost, which includes salaries, wages, and
employee benefits.
Noncontrollable costs – A cost that management cannot change in the
short term. Examples include rent, real estate taxes, and license fees.
Overhead – All costs other than prime costs.
Planned cost – an anticipated cost, projected by management, that
reflects business plans for the future.
Prime cost – The sum of food cost, beverage cost, and labor cost for a
given date.
Sales – Revenue resulting from the exchange of products and services
for value.
Sales mix – The ratio of the number of sales of one menu item to the
total number of sales of all menu items. Usually calculated for
particular segments of a menu (e.g., appetizers, entrees, or desserts).
Sales price – The dollar amount charged for each unit of any given
product or service sold.
Seat turnover – The number of seats occupied during a given period
divided by the number of dining seats in the restaurant; the number of
customers (or covers) served in a given period, divided by the number
of dining seats available.
Semivariable cost – A cost that has both fixed and variable elements,
such as that one component would not change as sales volume
changes, whereas the other component would change.
Total costs – The sum of all unit costs for a given period of time.
Total covers – The total number of all covers for a period, usually a
meal or a day.
Total dollar sales by category – The total volume of sales revenue for a
given period of time for a particular category of food, such as entrees,
beverages, and so on.
Total number sold – The total number of a menu item sold during a
given period of time.
Total sales – Total volume of sales revenue for a given period of time,
expressed in terms of dollars or units.
Total sales per seat – Total dollar sales for a given time period, divided
by the number of seats in the establishment.
Total sales per server – Total dollar volume of sales for which a given
server has been responsible in a given time period.
Unit costs – The cost of one or many like units, such as one portion of
a particular menu item (e.g., one steak or one martini) or one hour of
labor.
Variable costs – A total cost that changes when sales volume changes.
Variable costs are linked to business volume, such that total variable
cost increases and decreases as sales volume increases and
decreases.