Lecture Food and beverage cost control (5th Edition): Chapter 5 - Dopson, Hayes, Miller

Chapter 5 - Monitoring food and beverage product costs. This chapter presents the following content: Cost of sales, computing cost of food sold, computing cost of beverage sold, utilizing the cost of sales formula, reducing the cost of sales percentage, technology tools.

  Chapter Managing the Food and  Beverage Production  Process © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Main Ideas • • • • • • • • • Managing the Food and Beverage Production Process Product Issuing Inventory Control Managing the Food Production Area Managing the Beverage Production Area Employee Theft Determining Actual and Attainable Product Costs Reducing Overall Product Cost Percentage Technology Tools © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Managing the Food and Beverage  Production Process • The most important function of management is  controlling the food and beverage production process • Fundamentally, each foodservice manager is in charge  ofkitchenproduction â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller ManagingtheFoodandBeverage ProductionProcess ã Dailyproductionschedulesproductsandstaff neededtoproperlyserviceyourguests • Process of determining how much of each menu item  to prepare on a given day: Prior­Day Carry Over + Today’s Production = Today’s Sales Forecast+/­ Margin of Error                © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Figure 5.1 Production Schedules Unit Name: Scotto’s Supper Club Menu Item Prime Rib Broccoli Coconut Cream Pie Sales Forecast 85 160 41 Date: Prior-Day Carryover 15 70 New Production 75 170 Total Available 90 170 70 # Sold 1/1 Carry over 10 11 12 13 14 15 16 17 18 Special Instructions: Thaw turkeys for Sunday preparation Production Manager: S Antony â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller ManagingtheFoodandBeverage ProductionProcess ã Someofyourmenuitemssimplydonotretaintheir qualitywellwhentheyarecarriedoverfactorthis intoyourdecisiononproduction ã Somefoodservicemanagerspreưprinttheirproduction sheetslistingallmenuitems ã Othersprefertousetheproductionsheetonan asneededbasis â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson, Hayes, & Miller Managing the Food and Beverage Production Process • Production schedules lead employees to requisition  items • Inventory items are then issued, that is, taken from  storage and placed into the food and beverage  productionareas â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller ProductIssuing ã Therequisitionsystemshouldnotbetootimeư consumingandcomplicated ã Management should not equate products issued with  products sold without taking a physical inventory –  could have carryovers from prior day © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Figure 5.2 Storeroom Requisition Unit Name: Scotto's Supper Club Item Rice Broccoli Rib Roast Storage Unit lb lb lb Requisition #: Date: Requested Amount lb 30 lb 100 lb Issued Amount lb 28.5 lb 103.5 lb Total Cost Unit Cost $ 0.25/lb $ 0.90/lb $ 8.40/lb Total To: © 2011 John Wiley & Sons Kitchen Bar 0221 1/15 $ 1.25 $ 25.65 $869.40 $896.30 X Requisition Approved By: Requisition Filled By: S.A.R T.A.P Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Product Issuing • Maintaining product security can be achieved if a few  principles are observed: Food, beverages, and supplies should be  requisitioned only as needed based on approved  production schedules Required items (issues) should be issued only  with management approval © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Determining Actual and Attainable Product Costs • To check your figures to see if you should use a  particular yield% when purchasing an item, you can  proceed as follows: EP Required = AP Required x Yield %                • Good vendors are an excellent source for providing  tabled information related to trim and loss rates for  standard products they carry © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Determining Actual and Attainable Product Costs • Another way to determine net product yield% is to  compute it directly using the following formula:         EP Weight APWeight=ProductYield% ã TocomputeactualEPcost,usethefollowing formula: APPriceperpound ProductYield%=EPCost(perpound) â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson, Hayes, & Miller Determining Actual and Attainable Product Costs • Operational Efficiency – Compare how well you are  doing with how well you should be doing • Attainable product cost is defined as that cost of  goods sold figure that should be achievable given the  productsalesmixofaparticularoperation â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller DeterminingActualandAttainable ProductCosts ã Carbonfootprintưmeasureoftheimpacthuman activitieshaveontheenvironmentintermsofthe amountofgreenhousegases(carbondioxide) produced â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller DeterminingActualandAttainable ProductCosts ã Activitiestohelpreducecarbonfootprintwould include:  Buying food products locally Monitoring efficient energy usage regularly Avoiding the sale of bottled waters where the packaging  and shipping of these items result in the unnecessary  production of carbon dioxide Usingcoldwaterforcleaningwhenpracticalandsanitary Reduce,reuse,andrecycle â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller DeterminingActualandAttainable ProductCosts ã Operationalefficiencyratio: ActualProductCost AttainableProductCost=OperationalEfficiencyRatio ã Attainablefoodcostpercentage: CostasperStandardizedRecipes TotalSales= AttainableProductCost% â2011JohnWiley&Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Figure 5.17 Attainable Food Cost Unit Name: Steamer’s Date Prepared:1/8 Prepared by:J M Item Beef Stew Corn Chowder Ham & Bean Soup Time Period: Number Sold 150 140 160 Attainable Portion Cost $ 1.09 44 82 Total Cost $ 163.50 61.60 131.20 1/1-1/7 Menu Price $ 1.90 1.90 1.90 Total Sales $ 285.00 266.00 304.00 Turkey Sandwich Ham Sandwich Roast Beef Sandwich 130 190 125 1.02 1.20 1.74 132.60 228.00 217.50 5.90 5.20 5.90 767.00 988.00 737.50 Coffee Soda 175 525 20 46 35.00 241.50 1.85 1.75 323.75 918.75 Total $1,210.90 $ 4,590.00   © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Determining Actual and Attainable Product Costs • Attainable product cost excludes any losses due to  overcooking, overportioning, waste, theft, etc.   Therefore, it is rarely achieved • It is important for you to establish acceptability  variance ranges for your own facility © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Figure 5.18 Acceptable and Unacceptable Variance Item Steaks Coffee Bolla Soave Horseradish Parsley Actual Cost $1,010 20 550 22 45 Attainable Cost $ 1000 10 500 20 50 Efficiency Ratio 1.01 2.00 1.10 1.10 0.90 Dollar Variance $ 10 10 50 Percentage Variance 1% 100 10 10 10   © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Reducing Overall Product Cost Percentage If costs can be kept constant but sales increase, the cost  percentage goes down If costs remain constant but sales decline, the cost  percentage increases If costs go up at the same rate sales go up, the cost of  goods sold percentage will remain unchanged If costs can be reduced while sales remain constant, the  cost percentage goes down If costs increase with no increase in sales, the cost  percentage will go up © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Reducing Overall  Product Cost Percentage • • • • • • Decrease portion size relative to price Vary recipe composition Adjust product quality Achieve a more favorable sales mix Ensure that all product purchased is sold Increase price relative to portion size © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Figure 5.19 Impact of Drink Size on Liquor Cost Percentage at Constant Selling Price of $5.00 per Drink Drink Size Drinks per Liter Cost per Liter oz ¾ oz ½ oz ¼ oz oz 16.5 18.9 22.0 26.4 33.0 $ 16.00 16.00 16.00 16.00 16.00 Cost per Drink (cents) 97.0 84.7 72.7 60.6 48.5 Sales per Liter Liquor Cost % per Liter $ 82.50 94.50 110.00 132.00 165.00 19.4% 16.9 14.5 12.1 9.7   Figure 5.20 Impact of Sales Mix on Beverage Cost % Rum/Cola Fruit Brandy/Cola Combination#1 Total Rum/Cola Fruit Brandy/Cola Combination #2 Total Sales per Drink $5 5 Number Sold 60 40 100 40 60 100 Total Sales $ 300 200 500 200 300 500 Cost per Drink $1.04 0.68 0.896 Total Cost $ 62.40 27.20 89.60 1.04 0.68 824 41.60 40.80 82.40 Liquor Cost % 20.80% 13.60 17.92 20.80 13.60 16.48 â2011JohnWiley&Sons FoodandBeverageCostControl,5th Edition Dopson,Hayes,&Miller TechnologyTools ã Advancedtechnologyprogramsavailableforkitchen productionuseincludethosethatcanhelpbothyouandyour productionstaffmembers: Perform nutrition­related analysis of menu items Develop production schedules based on forecasted sales Create product requisition (issues) lists based on  forecasted sales Compute actual versus ideal costs based on product  issues © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Technology Tools Estimate and compute daily food cost Maintain physical or perpetual inventory; compute  inventory turnover rates Maintain product usage record Compare portions served to portions produced to  monitor over portioning Suggest usage for carryover products 10 Conduct “make versus buy” calculations to optimize  employee productivity and minimize costs © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller Summary • • • • • • • • • Managing the Food and Beverage Production Process Product Issuing  Inventory Control Managing the Food Production Area Managing the Beverage Production Area Employee Theft Determining Actual and Attainable Product Costs Reducing Overall Product Cost Percentage Technology Tools © 2011 John Wiley & Sons Food and Beverage Cost Control, 5th  Edition Dopson, Hayes, & Miller ... 1/ 1-1 /10 Total Issues $ 9 45. 00 7 85. 00 816 .50 9 75. 40 1 ,59 5 .50 1,100.20 18.40 906 .50 1,1 45. 25 546. 25 $8,834.00   © 2011 John Wiley & Sons Food? ?and? ?Beverage? ?Cost? ?Control,  5th  Edition Dopson, Hayes,? ?& Miller... 1/4 1 /5 1/6 1/7 1/8 1/9 1/10 Sub-Total +/Total Today $ 9 45. 00 7 85. 00 816 .50 9 75. 40 1 ,59 5 .50 1,100.20 18.40 906 .50 1,1 45. 25 546. 25 Date: 1/1 to 1/31 Beverage Cost Estimate Sales To Date $ 9 45. 00... 2 ,54 6 .50 3 ,52 1.90 5, 117.40 6,217.60 6,236.00 7,142 .50 8,287. 75 8,834.00 $8,834.00 - $1,000 $7,834.00 Today $1, 450 .22 1,688.40 2,003. 45 1,920.41 5, 546 .50 5, 921.27 4 95. 20 1,292.20 1,381 .51 1 ,54 8.21