FOOD COST CONTROL

controlling

a function o f management which ensures that

performance i s in accordance with the plan.

cost

expense; the price paid for goods or services when the goods are consumed or when services are rendered.

cost control

regulate cost based o n the cost-standards set by

the foodservice establishment.

Food Cost= Food Cost divided by revenue

cost of food items o r edible materials sold in a

foodservice establishment, often referred to as "cost oof goods sold.

beverage cost

cost related t o the sale of alcoholic beverages

labor cost

cost o f all employees involved in running the operation, referring to salaries and wages, fringe

benefits, insurance and retirement taxes.

fixed labor cost and variable labor cost

Two Categories of Labor Cost are:

fixed labor cost

salaries of employees who are paid a fixed amount, regardless of volume of business. (manager, cashiers, supervisor and chef.

variable labor cost

salaries or wages of employess which vary with changing volume of business

overhead cost

includes cost that are not classified a s food and labor, some are fixed (e.g. rental, depreciation and insurance

quality standard

degree of excellence o f raw materials

quantity standard

measures of weight, count or volume

standard cost

pre-determined cost o f food, labor and other

expenses which are decided upon during the planning process.

standard procedure

established methods, routines, techniques

and processes used in a day to day operations to ensure that cost standards are met.

standard recipe

a written formula detailing ingredients and respective quantities needed i n order to produce desired quality and quantity of a menu item

recipe conversion

involves adjusting the quantity of a recipe to

attain the desired yield o r serving portion

factor method and percentage method

Two methods of recipe conversion:

menu

list if food products o r items offered by a restaurant o r a foodservice establishment.

sales history

a written record o f the number o f portions o f each item sold every time it appears o n the menu; also known a s a daily summary o f portion sales.

popularity index

-ratio o f the number o f menu items sold in a given period over the total number o f menu items sold in the same period.

forecasting

predicting what is likely t o occur in terms o f revenue and expenses, using available data.

yield

the resulting quantity obtained after a recipe has been prepared, which may be expressed i n count, volume o r weight.

pre-costing

calculating the cost of a recipe prior to actual preparation t o determine whether it will meet cost objectives.

food cost percentage

the ratio of the cost o f food as purchased over the sales multiplied by 100

direct food cost method

This method i s only concerned with the cost of food in relation to selling price

What the Market will Bear

Based o n the assumption that if a customer attaches a certain value t o a product and is willing to pay much for it, there is no reason why it should not be marketed a t that price.

competition pricing

Largely based on the competitor's price, with the assumption that the competitor's prices are also satisfactory for one's clientele.

average cost plus profit

Possible if the menu i s relatively homogenous. Selling price is determined by getting over-all cost which it wishes t o cover, then add desired profits.

all cost plus profit

the percentage profit desired must first be ascertained.

minimum sale pricing

Based on the rationale that every customer costs a certain amount to serve, and those cost will be covered b y having a minimum charge.

tradition pricing

Some prices are considered traditional giving little room for variations.

price cost

Cost o f food plus labor, based on the fact that some food items are more labor intensive than others, thus making the direct food cost method impractical.

buying

an activity which involves setting policies and making decisions about what product t o buy, how t o buy them, who are the vendors t o be patronized and at what frequency and quantity

ordering

a clerical activity involved i n the buying procedure

purchase standards

rules or measures established for making comparisons and judgements t o be used as basis for determining the extent t o which results meet

expectations

quality standards

the degree o f excellence o f raw materials and finished products

quantity standards

measure o f weight, count or volume

specifications

statement of particulars developed for every material purchased, developed according to purchase standards

par stock

the normal quantity o f an item required in a given operating period

record point

figure representing the number o f units that should be on the shelves before additional quantities are ordered

standing order

prepared in advance, orders specify how much a n item should be automatically delivered each day of a week or a month

purchase order

written request by the buyer for the vendor to sell goods and services to an establishment

centralized purchasing

there's a purchasing department

group or cooperative purchasing

independent buyers representing different establishments group together to purchase their requirement and allows the group to negotiate for a good price

Blank Purchase Agree(BPA)

buyer vendor agreement whereby the vendor agrees to supply the buyer on a charged basis

Just-in-Time Purchasing (JIT)

agreement where products are purchased i n the exact quantities required fir a specific use in food preparation/production and deliveredM"just in time" t o meet production requirements

blanket order

also called master contracts, is one of the efficient

means of reducing the umber of small, repetitive orders,

lead time

period of time from date of ordering to delivery

contract

agreement between two or more competent persons

breach of contract

failure to perform a t the time and in the manner required by the contract

force majeure

contracts shall contain a provision which will permit non- performance b y either party o f specific conditions stipulated in the contract, if it is the result of fire, war o r labor problems beyond the party's control

consignment

goods entrusted to another for sale

earnest money

money given by one party to another upon entering into a contract which could b e forfeited for failure

free on board

agreement whereby the seller is required to place

the goods aboard the transporting carries without cost to the buye

C.I.F (Cost, Insurance, Freight)

cost o f marine insurance i s for the account o f the seller

bill of lading

a carrier's contract and receipt for goods by which he

agrees to transport from one place t o another.

warranty

a promise given b y a seller to the buyer that the goods

invoice

document showing the quantity, quality, price, terms and other particulars of the goods sold o r service rendered; a bill

yield testing

a process o f determining the amount o f edible portion and waste i n a food product

raw food test

-process o f determining the best count and weight for specific food items based on the needs of the establishment

butchering test

used to evaluate the actual portions obtained after waste, trim and by- products are removed form wholesale cut o f meat, fish o r poultry

cooking test

used to determine a food item's final yield when cooked

contract price

The price of a product agreed upon between buyer and seller, which is expected t o remain unchanged over a specified period o f time.

blind receiving

The supplier is instructed not to furnish the receiving clerk with an invoice as the goods are delivered, and instead, t o send invoice directly t o the

accounting office

receiving report

Listing of all goods received for the day, classified

according to group.

shorting

Term used when items ordered are not delivered

credit memo

A form filled up by a receiver and signed by the

delivery man listing the goods rejected and

returned to supplier

shelf life

Length of storage time in which a food item can retain its qualities, such a s freshness, flavor, texture,

color, etc.

bin card

Stock card prepared per commodity with description of the commodity, date received, balance remaining,

minimum stock level; used to facilitate ordering of supplies

requisition form

Used by the requesting party, signed and approved b y the immediate supervisor, providing authority for the release of merchandise from the storeroom.

extending the requisition

Process o f pricing merchandise issued from the storeroom by multiplying the unit cost by the total

number of units issued to determine total cost of goods issued

extended price

the unit price of a stored item, multipled by the quantity

buffer stock

Safety level o f goods stored which will always exist if purchasing goes according to plan

working stock

Actual amount o f goods in use which rises and falls as each batch is received and issued

reorder level

Stock needs replenishing t o cover

normal future demand

stock level

Any stored item is to be held in order to avoid danger of overstocking or running out of supply.

inventory

Taking an actual count of goods in store.

spot check inventory

done at random to evaluate the performance and efficiency of the receiving clerk.

perpetual inventory

shows on record the exact balance o n hand of each item in store.

month-end physical inventory

an actual physical count of stored goods is conducted at the close of business o n the last day of

the trading period.

inventory turnover

Number of times i n a given accounting period when the total value of inventory has been purchased and replace

As purchased or AP

weight before trimming or removal of undesirable or unusable parts

edible portion or ep

weight after trimming, preparation and cooking

forecasting

redicting what is likely to occur in terms of revenue and expenses, using available data

standard recipe

Written formula detailing ingredients and respective quantities needed for each, in order to produce the desired quality and quantity of a menu item

Production Sheet

list of menu items and the number of portion of each to be prepared based on a projected sales or forecast

portion size

Quantity of a menu item to be served per person, as stipulated in the standard recipe

portion control

Involves determining a definite size per serving of a menu item and making certain that this designated portion is always served

quality control

Consistent production of menu items that meet specified requirements in quality and yield and with minimum waste.

food checker

Person assigned to very every item leaving the kitchen on its way to the dining area, and to check these items against the guest

guest check

each item ordered by the guest and its corresponding selling price.

void sheet

Record of portions or dishes returned from e customer to the kitchen containing the following information: a. Name of item returned Person responsible for release c. Reason for return

sales mix

Variation of menu items and quantities of each which customers buy or sold at a given time

sales reconcillation

Procedure whereby a comparison is made of the portions sold after every meal as tabulated by the cashier or a representative of the accounting office, with the portions issued from the kitchen as shown by the production sheet, to determine whether all items issued were pain for.

budget

An organized plan of operation for a specific period of time which forecasts activities and income or revenue, expenses and other disposition of funds and estimates on over-all financial position at the end of a specific period. Aimed to achieve goals, it provides information on what must be done to meet predetermined profit and cost objectives

operating budget

forecast sales activity and expense categorized food and labor

cash budget

shows the inflow and outgo of funds and the amount on hand

equipment budget

indicates when it is financialy feasible to purchase equipment, and help in deciding priority purchases

Renovating, Remodeling and Repair Budget

provides for renovations, remodeling and repair of facilities

long range budget

Covers a period of 3 to 5 years, providing a long-term view of the operation