Food, Beverage and Labor Cost Process

8/14/2019 Food, Beverage and Labor Cost Process

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Copyright 2006 by John Wiley & Sons, Inc. All rights reserved

The Control ProcessThe Control Process


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Important Control DefinitionsImportant Control Definitions

Control: Process used by managers to direct,Control: Process used by managers to direct,regulate and restrain the actions of people soregulate and restrain the actions of people sothat the established goals of an enterprise maythat the established goals of an enterprise maybe achievedbe achieved

Cost Control: Process used by managers toCost Control: Process used by managers toregulate costs and guard against excessiveregulate costs and guard against excessivecostscosts

Standards:Rules or measures established forStandards:Rules or measures established for

making comparisons and judgmentsmaking comparisons and judgments Standard cost: Cost of goods and servicesStandard cost: Cost of goods and services

identified, approved and accepted byidentified, approved and accepted bymanagementmanagement


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Important Control DefinitionsImportant Control Definitions

Standard procedures: Procedures that haveStandard procedures: Procedures that have

been established as the correct methods,been established as the correct methods,

routines and techniques for day-to-dayroutines and techniques for day-to-day

operationsoperations

Budget: Realistic expression of managementsBudget: Realistic expression of managements

goals and objectives expressed in financialgoals and objectives expressed in financial

termsterms

Control system: Collection of interrelated andControl system: Collection of interrelated andinterdependent control techniques andinterdependent control techniques and

procedures in use in a given food and beverageprocedures in use in a given food and beverage

operationoperation


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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 thecost of the new procedures.

Cost/benefit ratioCost/benefit ratio


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Control techniques available to aControl techniques available to a

manager include the following.manager include the following.

- Establishing standards- Establishing standards

- Establishing procedures- Establishing procedures

- Training- Training - Setting examples- Setting examples

- Observing and correcting employee actions- Observing and correcting employee actions

- Requiring records and reports- Requiring records and reports - Disciplining employees- Disciplining employees

- Preparing and following budgets- Preparing and following budgets


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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

The control process consists of fourThe control process consists of four

steps.steps.


7/12Copyright 2006 by John Wiley & Sons, Inc. All rights reserved

Additional TermsAdditional Terms

Control processControl process Flexible budgetFlexible budget Operating budgetOperating budget ProceduresProcedures Quality standardsQuality standards Quantity standardsQuantity standards

Sales controlSales control Static budgetStatic budget


8/12Copyright 2006 by John Wiley & Sons, Inc. All rights reserved

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 aboutsales and costs that affect the direction of the

overall operation.


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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 orher budget, monitors it closely, modifies it when

necessary, and achieves the desired results.


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Developing the BudgetDeveloping the Budget

To establish any type of budget, you need toTo establish any type of budget, you need tohave the following information available:have the following information available:

1. Prior period operating results1. Prior period operating results

2. Examine the external environment to assess2. Examine the external environment to assess

any conditions that could affect sales volume inany conditions that could affect sales volume inthe coming yearthe coming year

3. Review any planned changes in the operation3. Review any planned changes in the operationthat would affect sales volumethat would affect sales volume

4. Determine the nature and extent of changes in4. Determine the nature and extent of changes incost levelscost levels

5. Have the projections for sales, costs and profits5. Have the projections for sales, costs and profits

approved by managementapproved by management


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Monitoring the Budget

In general, the budget should be

monitored in each of the following three

areas:

1. Revenue

2. Expense

3. Profit


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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 asthese 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 risk.

The primary goal of management is to generatethe profits necessary for the successful continuation

of the business. Budgeting for these profits is a

fundamental step in the process.

Food, Beverage and Labor Cost Process

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