Cost Control
THE COST AND SALES CONCEPT
Cost is defined as a reduction in the value of an asset for the purpose of securing benefit or gain. Cost is defined in a hotel and restaurant as the expense to a hotel or restaurant for goods or services when the goods are consumed or the services are rendered.
KINDS OF COSTS 1. Fixed costs – are those that are normally unaffected by changes in sales volume. They are said to have little direct relationship to the business volume because they do not change significantly when the number of sales increases or decreases. 2. Variable costs – are those that are clearly related to business volume. As business volume increases, variable costs will increase; as volume decreases, variable costs decreases, too. 3. Payroll costs – include salaries and wages and employee benefits, and often referred to as labor costs. Payroll costs have both the fixed element and the variable element that is called semi-variable cost, meaning that a portion of it should change with short-term changes in business volume, and another portion should not. 4. Controllable costs – are those that can be changed in the short term. Variable costs are normally controllable. 5. Non-controllable costs – are those that cannot normally be changed in the short term. These are normally fixed costs. 6. Prime cost – is a term used to refer to the costs of materials and labor: food, beverages, and payroll. 7. Historical costs – all costs are historical, that is they can be found in business records, books of accounts, financial statements, invoices, employees’ time cards, and other similar records. 8. Planned costs – projections of what costs will be or should be for a future period.
Sales - defined as revenue resulting from the exchange of products and services for value. There are two basic groups of terms normally used in food and beverage operations to express sales concept: monetary and non-monetary.
Monetary terms
Cost is defined as a reduction in the value of an asset for the purpose of securing benefit or gain. Cost is defined in a hotel and restaurant as the expense to a hotel or restaurant for goods or services when the goods are consumed or the services are rendered.
KINDS OF COSTS 1. Fixed costs – are those that are normally unaffected by changes in sales volume. They are said to have little direct relationship to the business volume because they do not change significantly when the number of sales increases or decreases. 2. Variable costs – are those that are clearly related to business volume. As business volume increases, variable costs will increase; as volume decreases, variable costs decreases, too. 3. Payroll costs – include salaries and wages and employee benefits, and often referred to as labor costs. Payroll costs have both the fixed element and the variable element that is called semi-variable cost, meaning that a portion of it should change with short-term changes in business volume, and another portion should not. 4. Controllable costs – are those that can be changed in the short term. Variable costs are normally controllable. 5. Non-controllable costs – are those that cannot normally be changed in the short term. These are normally fixed costs. 6. Prime cost – is a term used to refer to the costs of materials and labor: food, beverages, and payroll. 7. Historical costs – all costs are historical, that is they can be found in business records, books of accounts, financial statements, invoices, employees’ time cards, and other similar records. 8. Planned costs – projections of what costs will be or should be for a future period.
Sales - defined as revenue resulting from the exchange of products and services for value. There are two basic groups of terms normally used in food and beverage operations to express sales concept: monetary and non-monetary.
Monetary terms