Cost
Definition –
Cost is defined as a reduction in the value of an asset for the purpose of
securing benefit or gain. In f&b service terms it means the price for the goods
and services, when goods are consumed and services are rendered.
Costing is defined as the ascertainment of cost relating to a suitable unit of
output.
Cost control is defined as the process by means of which managers attempt to
direct, regulate and restrain the activities relating to cost in order to achieve
the desired financial goal of the establishment.
Classification –
1. Fixed Cost
These costs remain unaffected by the changes in the turnover of an
establishment, they remain fixed over a period of time, e.g., insurance,
rents, labor cost, etc.
C
O
S Fixed Cost
T
O SALES X
2. Variable Cost
Costs, which change in direct proportion to the sales, they increase with
the increase in sales, e.g., food cost, beverage cost, etc.
Y Variable Cost
C
O
S
T
O SALES X
3. Semi-variable Cost
These costs change with the change in sales but not in direct proportion,
e.g., fuel, electricity, telephone expenses, etc.
Y
Variable Cost
C
O Semi-
variable Cost
S Fixed Cost
T
O
SALES X
Elements of cost
Raw material cost / Material cost / Food Cost – these are the cost of
ingredients required to prepare a dish.
Cost of employees / Labor Cost – salaries and other benefits to staff like
– housing, medical, bonus, etc.
Overhead Cost – costs, which cannot be directly identified with any
particular department or unapportioned cost like – rent, insurance, fuel,
etc.
Food Costing –
It is the process of calculating food cost to ensure that the cost are neither
more nor less than they ought to be.
The following points shows the sequence that should be adopted to determine
operating cost and the profit targets.
Determine overall profit target is return on capital employed.
Determine what profit percentage on net profit on sale should be aimed at.
What % of revenue will be required to cover labor cost and overheads and
what % of revenue can be therefore be available to cover the cost of sales.
By reference to the projected sales, mix determine the cost of sales for each
department of business i.e. food, beverages, tobacco etc.
Having determined the overall cost of sales for each plan and differential
profit margins for each group of items offered in the menu.
The main stages of food control are:
a. Purchase
b. Receiving
c. Control during storing and issuing
d. Preparing and service
Simple control system
The k.o.t's, bots and bills are a part of simple control system. To ensure that
there is no discrepancies in production and service and also to ensure that the
guest receives the items he has ordered.
3 k.o.t’s - kitchen
- Waiter’s copy
- Cashier OR Book copy for future reference.
Bills
- guest
-attached with second copy of k.o.t which goes to the accounts dept.
Reasons for high food cost
I. Purchasing of raw materials at a higher price.
II. No standard portion control
III. Lack of market survey at the time of purchasing.
IV. The quantity received not in accordance to the purchase ordered.
V. Incorrect weighing machines used while receiving.
VI. Spoilage and pilferage in stores
VII. No following of standard recipe.
VIII. No portion control while receiving.
IX. No recycling of leftover food items.
X. Faulty menu pricing.
XI. Defective k.o.t control in outlets.
XII. Money collected by service staff without generating the bills.
XIII. Discounted sales of undercharges.
Calculation of Food Cost –
Food Cost = Opening Stock + Purchase / Commodities received from
stores + Kitchen Transfer (inward) – Closing stock – On The House (OTH)
– Staff Meal – Kitchen Transfer (outward)
