1. Cost Control Objectives: What is the importance of cost control?
How do you complete purchase orders?
What do you do with food after it reaches the food service operation?
How do you compute food costs?
What are cost control measures & how do you perform them?

2. Management & Cost Control
Management – controlling & directing in order to get a job done correctly & efficiently within the allotted time.
Also refers to person(s) responsible for managing the food service operation.
Each person has different responsibilities, but same goal – MAKE OPERATION RUN SMOOTHLY.
Financially successful businesses operate with strict cost control measures & good record keeping.
Management must know what is to be purchased, when & what amounts, & best price of items.
Work schedule planned with effort to increase productivity.

3. Cost Control System
When establishing a cost control system, consider the price paid for products & services.
Everyone is responsible for cost control in a food service operation.
Basic factors for successful program are:
The menu.
Purchasing, receiving, storing, issuing ingredients & supplies.
Portion control.
Waste control.
Sales & service.

4. Labor Costs Large part of entire operation’s budget.
Most large operations provide fringe benefits for full-time employees, part-time workers rarely receive benefits.
Labor costs include:
Salaries
Vacation, holiday, & sick pay
Uniforms & meals
Social security taxes
Workers comp insurance
Benefits (health, life, & disability insurance)
Cost of labor is affected by how efficiently employees work (talking when supposed to be working, taking unnecessary sick days – waste of money & time).
The fewer the employees, the lower labor costs will be.

5. Food Costs
Include: actual cost of all foods used, plus delivery & transportation costs.
Type of food, quality, & availability are factors that affect food costs.
Precosting – figuring the cost of each ingredient used in a recipe.
Standard portion cost worksheet for a dish lists the following:
Name of product
# of servings yielded
Ingredients & amounts
Purchase price per unit of each ingredient
Cost of each ingredient
Total cost of recipe
Cost per serving
Manager bases selling price of food by the recipe. (Example of precosting worksheet on page 64).

6. Pricing The price customer pays for meal covers:
Cost of food itself
Share of operating cost of food service establishment (labor, rent/mortgage, insurance, taxes, nonfood supplies)
1st step in menu pricing: determine food costs (see Worksheet for Standard Dinner Cost, page 65)
Most operations have food cost percentage level, meaning specific percentage of money taken in is spent to purchase food.
Nonprofit operation – food cost percentage is high, luxury restaurant – lower. (See equation, page 65)
Other factors to be considered:
Prices must be in line with other operations that serve similar food & service.
Not all foods give same amount of profit.

7. Quality Control
Means setting standards to keep food quality consistently high.
Standards include:
Using quality ingredients.
Using standardized recipes.
Following approved cooking procedures.
Serving portions of the correct size.
Keeping prepared foods fresh & safe to eat.
Using leftovers in other meals.

8. Purchasing Food
Person responsible for buying food & other supplies is called a buyer, a steward, or purchasing agent.
Must buy the right quality at the right price.
In a small business; the manager or chef may do the buying.
Larger operation, full time job, this person is part of the management team.

9. Steps in Purchasing
Determine what is needed by checking recipes & supplies on hand.
Determine quantity & quality needed for each item.
Obtain price quotations from several vendors.
Choose best vendor for each item.
Order supplies.
Receive & inspect goods.
Check invoice against order to be sure it’s accurate.
Complete all purchasing records

10. The Purchase Order
Purchase order (P.O.) – a form the buyer fills out telling what products should be delivered.
Separate PO for each vendor.
See example on page 68.
When filling out a PO, each one is given a number & 2 copies are created with the following information:
Item needed
Quantity
Unit desired (size/type of container used in packaging).
Clear description of item
Unit price per weight, measure, can, or package.
Total price.
Date/time of delivery.

11. Specifications
Specifications – a definite statement of the standards expected for a particular product.
Includes information on wholesomeness, quality, type/size of container, count per unit of weight, total weight of item ordered.
This helps vendor deliver the right product.

12. Specification Card
Cards give buyer all information needed to prepare purchase orders.
Wholesomeness – foods that are safe to eat. All food shipped between states must meet standards set by the USDA & FDA.
Quality – USDA has 4 labels (shields) that appear on fresh & processed meats. See bottom of page 69 & page 70 for different grades.
Containers – buyer must specify the kind and size of container for each product ordered. See page 71 for “Common Can Sizes” chart.

13. Storing Food
This is important to maintaining quality and cost control.
Storeroom clerks or receiving clerks are in charge of the room where all supplies are kept.
Receiving Procedures
2 copies of invoice, 1 copy of PO included in order.
Storeroom clerk checks each item on PO against item on invoice.
Item is damaged or missing, a note is made on PO & invoice.
If items do not meet specifications, returned to vendor.
Clerk signs/dates PO & invoice with pen.
Items become inventory – itemized list of food & supplies on hand.

14. Storage Procedures Stored in orderly manner. Similar items together.
Odor causing foods (onions) should be stored away from odor absorbing foods (cheese).
Use older supplies first, new items should be placed in the back, old ones moved forward (stock rotation).
Storage area must be clean, free from insects & other pests.
Refrigerators need weekly cleaning, spills wiped up immediately.
Heavy articles stored near bottom shelves, lighter up top.
Storeroom should be locked when unattended.