Cost Control

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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 –total volume of sales expressed in peso terms.

a. Total sales by category – are total food sales or total beverage sales, referring to the total volume of sales for all items in one category. b. Total sales per server – is the total peso volume of sales for which a given server has been responsible in a given time period, such as meal period, a day or a week. c. Total sales by seat – is the total peso sales for a given time period divided by the number of seats in the restaurant. d. Sales price – refers to the amount charged each customer purchasing one unit of a particular item. e. Average sales - is determined by adding individual sales to determine a total and then dividing the total by the number of individual sales. f. Average sales per customer – is the result by dividing total peso sales by the number of sales or customers. g. Average sales per server – is the total peso sales for an individual server divided by the number of customer served by the individual server.

Non-monetary terms

a. Total number sold – refers to the total number of category sold like steak, shrimp cocktail or any other menu item sold in a given time period. b. Cover – is a term used to describe one diner, regardless of the quantity of food he or she consumed. c. Total covers – refer to the total number of customers served in a given period: an hour, a meal period, a day, a week, or some other. d. Average covers – is determined by dividing the total number of covers for a given time period by some other number. The following are some of the more common : Covers per hour = total covers/ number of hours of operation

Covers per day = total covers/ number of days of operation
Covers per server = total covers/number of servers
e. Seat turnover – refers to the umber of seats occupied during a given period divided by the number of seat available. f. Sales mix – is a term used to describe the relative quantity sold of a menu item...
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