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Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition.

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Presentation on theme: "Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition."— Presentation transcript:

1 Principles of Food, Beverage, and Labor Cost Controls, Ninth Edition

2  Control: Process used by managers to direct, regulate and restrain the actions of people so that the established goals of an enterprise may be achieved  Cost Control: Process used by managers to regulate costs and guard against excessive costs  Standards:Rules or measures established for making comparisons and judgments  Standard cost: Cost of goods and services identified, approved and accepted by management

3  Standard procedures: Procedures that have been established as the correct methods, routines and techniques for day-to-day operations  Budget: Realistic expression of management’s goals and objectives expressed in financial terms  Control system: Collection of interrelated and interdependent control techniques and procedures in use in a given food and beverage operation

4 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 the cost of the new procedures.

5  - Establishing standards  - Establishing procedures  - Training  - Setting examples  - Observing and correcting employee actions  - Requiring records and reports  - Disciplining employees  - Preparing and following budgets

6 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 standards.

7  Control process  Flexible budget  Operating budget  Procedures  Quality standards  Quantity standards  Sales control  Static budget

8 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 about sales and costs that affect the direction of the overall operation.

9  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 or her budget, monitors it closely, modifies it when necessary, and achieves the desired results.

10 1. Prior period operating results 2. Examine the external environment to assess any conditions that could affect sales volume in the coming year 3. Review any planned changes in the operation that would affect sales volume 4. Determine the nature and extent of changes in cost levels 5. Have the projections for sales, costs and profits approved by management

11 Monitoring the Budget  In general, the budget should be monitored in each of the following three areas: 1. Revenue 2. Expense 3. Profit

12  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 as these 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.  The primary goal of management is to generate the profits necessary for the successful continuation of the business. Budgeting for these profits is a fundamental step in the process. © John Wiley & Sons, Inc. 2009

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