Introduction to Food
and Beverage Cost
Control
Chapter 1
By: Emmery P. Balbas,MBA, LPT
HMP3 Food and Beverage Cost Control
1st Sem 2024-2025
Foodservice Business Flowchart
Purchases
RAW MATERIALS AND
CASH RESERVES
LABOR
Profit Supplies
Produces
ACCOUNTS Generate
FINISHED PRODUCTS
RECEIVABLE OR CASH
The Foodservice Environment
Internal Foodservice External Foodservice
Environment Environment
Front-of-House Functions Government Regulations
Back-of-House Functions Local market Conditions
Management Functions Economic Conditions
- Planning Supplier Relations
- Organizing and Influencing New Technology
- Controlling Media
Four (4) Areas if Control in the Foodservice
Industry
MAXIMIZE FOOD CONTROL EXPENSES MANAGE MAXIMIZE PROFIT
AND BEVERAGE EMPLOYEES
SALES
Control Vs. Cost Control
CONTROL IS TO EXERCISE AUTHORITY OVER, REGULATE, COST CONTROL IN THE FOOD SERVICE INDUSTRY IS
VERIFY OR CHECK SOME FUNCTIONS THROUGH A DEFINED AS THE PROCESS OF REGULATING, CHECKING
METHOD, DEVICE OR SYSTEM AND EXERCISING AUTHORITY OVER (1)INCOME, (2)
EXPENSES, (3) THE FLOW OF PRODUCTS AND SERVICE
INTERNAL OR EXTERNAL TO A FOODSERVICE OPERATION.
Cost and Sales
Terms, Concepts
and
Classifications
Chapter 1
Learning Objectives:
Define Define the terms cost and sales .
Define and provide an example of the following types of costs: fixed, directly variable, semi
Define and provide variable, controllable, non controllable, unit, total, prime, historical, and planned.
Provide Provide several examples illustrating monetary and nonmonetary sales concepts.
Describe the significance of cost - to - sales relationships and identify several cost - to - sales
Describe ratios important in food and beverage management.
Identify Identify the formulas used to compute cost percent and sales price.
Describe Describe factors that cause industry wide variations in cost percentages.
Explain Explain the value of comparing current cost - to - sales ratios with those for previous periods
COST
Accountants define a cost as a reduction in the value of an asset for the
purpose of securing benefit or gains.
In F&B Business cost is defined as the expense to a hotel or restaurant of
goods or service when the goods are consumed or the service rendered.
Food and beverage are “Consumed” when they are used, wastefully or
otherwise, and are no longer available for the purpose which they were
acquired.(Units: weight, volume or total value)
The cost of labor is incurred when people are on duty, whether or not they are
working and whether they are paid at the end of the shift or at some later
date. (Hourly or weekly or monthly
Uses of Cost Data
Planning Controlling Measuring Assisting Furnishing
• Planning Profit • Controlling costs • Measuring • Assisting in • Furnishing
• By means of via responsibility annual or establishing relevant cost
Budget accounting periodic profit selling prices data for
and a pricing analytical
Policy processes for
• Pricing Policy- decision making.
• BUDGET- is the
methods and
forecast of the
directions in
effects on
which
profits of
companies, the
varying volumes
government
of activity.
and other
agencies seek
to influence
the price of
goods and
services.
Cost Classifications
Fixed Cost (FC) and Variable
Cost (VC) are used to
Fixed Cost are those that are
distinguished between those
normally unaffected by changes
cost that have no direct
in sales volume.
relationship to business and
those that do.
The term fixed should never taken to
Variable Cost are those that
mean static or unchanging but merely
are clearly related to business
to indicate that any changes that may
volume. As business volume
occur in such cost are related only
increase, variable cost will
indirectly or distantly to changes in
increase and vice versa.
business volume
Cost
Classifications
Food & Beverage cost are considered directly
variable cost.
Direct Variable Cost are those that are
directly linked to volume of business increase
and decrease of volume correspondingly.
•Payroll Cost includes salaries and wages and
employee benefits and often referred as
Labor Cost.
Because labor cost consist of fixed and
variable element it is known as semi-variable
cost, meaning a portion should change in
short-term and the other portion remains
unchanged
Cost Classifications
Controllable cost are those that can be
change in the short term such as Direct
Variable Cost, Wages, Advertising &
Controllable Promotion, Utilities, Repairs & Maintenance
and Administration and General Expenses.
and
Noncontrollable Non-Controllable cost are those that cannot
normally be changed in short-term such as
Costs fixed cost like Rent, Interest on a mortgage,
Real estate taxes, License fee and
Depreciation
Unit Cost may be food & beverage
portion as in the cost of one item or
hourly unit of work.
Cost In F&B business unit cost are
commonly in average unit cost rather
Classifications then actual unit cost.
Total Cost are the total of food &
beverage portions served in one period
such as a week or a month or total
cost of labor for one period
Cost Classifications
Prime Cost is a term used in the Hotel Industry refer to the
cost of materials and labor. (Food, Beverage and Payroll)
Historical and Planned Costs
• Historical cost are all cost are historical - that is, that they can be found in
business records, book of account, financial statements, invoices,
employees’ timecard and other similar records. It is used for establishing
unit cost, determining menu prices and comparing present with past labor
cost.
• It will be used for planning and determining the future to develop planned
costs - projections of what cost will be or should be for a future period. It
is often called as Budgeting
Industry-Wide Variations in Cost
Cost percentage vary considerably from one foodservice
operation to other. This is due to many possible reasons.
Basically, there are two types of foodservice operation.
Those that operate at low profit margin and depends on
relatively high business volume.
Those that operate at relatively high profit margin thus
does not require high business volume
Sales Concept
In general, the term sales is defined as revenue
resulting from the exchange for a products (Food
& Beverage) and service (Waiter) for value ($$).
The sales concept in F&B operation usually can
be express as: monetary and non-monetary
Sales Concept Monetary Terms
Total Sales is a term that refers to the total volume expressed in
dollar term for instant any given period , such as a week, a
month or a year.
By Category. Total dollar volume of sales by category are total food
sales or total beverage sales. Or total steak sales or seafood sales.
By Server. This is total dollar volume of sales for which a given
server has been responsible in each period. This is to help the
management to make judgment on employees' performance.
By Seat. Usually for a year period. Total Dollar sales divided by the
number of seats in the restaurant
Sales Concept Monetary Terms
Sales Price refers to the amount charged each customer
purchasing one unit of a particular item. It can be a single
meal or entire meal.
Average Sale in business is determine by adding individual
sales to determine a total and then dividing that total by
the number of individual sales. Two types of commonly
calculated averages are: average sale per customer and
average sale per server.
Per Customer is the result of dividing total dollar sales by the
number of customer.
Per Server is total dollar sales for an individual server divided
by number of customer served by that individual
Average Sale
This average is determined as follows:
Average check = Total dollar sales ÷ Total number of covers
Total sales of $3,902.30 and 140 covers. Thus,
Average sale = $3,902.30 ÷ 140 = $27.87
Yasser, one of the servers, had 30 customers and total dollar sale
of $565 on the Saturday night of February 13, average sale per
server for Yasser would be calculated as follows:
Average sale per server= Total sales for Yasser ÷ No. of customers
for Yasser = $565 ÷ 30 = $18.83
Sales Concept Non-Monetary Terms
Total Number Sold refers to the total number of menu item sold
in a given time period.
Cover is the term used to describe one diner regardless of the
quantity of good the person consumes.
Total Cover refer to the total number of customer served in a
given period. Help to make judgment & comparisons
Average Covers is determined y dividing the total number of
cover for a given period by some other number such as hour of
operation, day of operation or numbers of server.
1. Cover per Hour = Total Covers / No. of Hours of Op.
2. Covers per Day = Total Covers / No. of Days of Op.
3. Covers per Server = Total Covers / No. of Server
Sales Concept Non-Monetary Terms
Seat Turnover or simply turnover refer to the number of seats
occupied during a given period (or number of cover) divided
by the number of seats available.
140 customers served during that one Saturday meal. The
restaurant has 75 seats, so seat turnover would be calculated
as follows:
Seat turnover = Number of customers served ÷ Number of seats
= 140 ÷ 75
= 1.87 turn
Sales Concept Non-Monetary Terms
Sales Mix is a term used to describe the relative quantity
sold of any menu item compared to other items in the same
category.
Sales Mix For the Sugar & Spice Restaurant
August 20xx
Menu Item Portion Sales Sales Mix
Strip steak 1,000 12.5%
Ginger shrimp 1,200 15.0
Lamb chop 1,800 22.5
Vege buritto 2,400 30.0
Chicken chop 1,600 20.0
Totals 8,000 100.0%
The Cost-to-Sales Ratio
Foodservice establishment calculate cost in dollars and compare those
cost to sales in dollars. This enable them to discuss the relationship
between cost and sales or the cost per dollar of sale.
Cost ÷ Sales = Cost per dollar of sale
decimal answer, and any decimal can be converted to a percentage if
one multiplies it by 100 and adds a percent sign (%).
Cost ÷ Sales x 100 = Cost%
$ 312,090 ÷ $ 891,687 = .35 and .35 x 100 = 35.0 %
Food cost ÷ Food sales x 100 =Food cost%
Beverage cost ÷ Beverage sales x 100 = Beverage cost%
Labor cost ÷ Total sales x 100 = Labor cost
The Cost-to-Sales Ratio
The formula also can be use to determine the Sales price if the
cost% is known.
Cost ÷ cost% = Sales(or Sales Price)
If the given cost percentage were 30.0 percent and the food
cost for the item were $3.60, the appropriate sales price would
be $12.00, illustrated here
30.0 % ÷ 100 = 0.3
$ 3.60 ÷ 0.3 = $12.0
The Cost-to-Sales Ratio
The formula also can be use to determine the cost if the
spending power and cost% is known.
Suppose this banquet manager is dealing with a group willing
to spend $15.00 per person for a banquet, and the same given
30.0 percent cost percent is to apply. Calculation of the
maximum permissible cost per person is facilitated by
rearranging the formula once again:
Sales x Cost % ( expressed as a decimal ) = Cost
Sales X Cost % = Cost
the cost per person can be calculated as $4.50: 30.0 % ÷ 100 =
0.3 $ 15.00 X 0.3 = $ 4.50
The Triangle of Enlightenment:
Tutorial
1. Given the following information, calculate cost percentages. Round your answers to the
nearest tenth of a percent.
a. Cost, $200.00; Sales, $500.00 = 40%
b. b. Cost, $150.00; Sales, $500.00 = 30%
c. c. Cost, $178.50; Sales, $700.00 = 26%
d. d. Cost, $216.80; Sales, $800.00 = 27%
2. Calculate cost, given the following figures for cost percent and sales:
a. Cost percent, 28.0%; Sales, $500.00= $140
b. b. Cost percent, 34.5%; Sales, $2,400.00= $828
c. c. Cost percent, 24.8%; Sales, $225.00 = $ 55. 80
d. d. Cost percent, 31.6%; Sales, $1,065.00 = $ 336. 54
3. Calculate sales, given the following figures for cost percent and cost:
a. Cost percent, 30.0%; Cost, $90.00 = $300
b. . Cost percent, 25.0%; Cost, $500.00 = $2,000
c. c. Cost percent, 33.3%; Cost, $1,000.00= $ 3,003.00
d. d. Cost percent, 27.3%; Cost, $1,300.4= $4, 763. 37