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

Sales mix will remain constant .Costs can be fixed or variable .VC are directly variable .Fixed costs are stable .` ` ` ` ` .Sales prices are constant .

Large \$ Losses Small \$ 0 \$ Small \$ Profits Large \$ .Cost/Volume/Profit Analysis Each foodservice operator knows that some accounting periods are more profitable than others. is called the break-even point. indicated by the zero. At the break-even point. operational expenses are exactly equal to sales revenue. then. can be viewed as existing on a scale. The midpoint on the scale. Profitability.

. or on the basis of the number of units required. A cost/volume/profit (CVP) analysis helps predict the sales dollars and volume required to achieve desired profit (or break even) based on your known costs.CVP calculations can be done either on the dollar sales volume required to break even or achieve the desired profit.

Variable Costs = Contribution Margin . Contribution margin is calculated for as follows: Total Sales .Contribution margin for the overall operation is defined as the dollar amount that contributes to covering fixed costs and providing for a profit.

` ` ` 1.VR . Variable rate = VC/Sales 3. Sales = VC + FC + Profit 2. Contribution rate = 1 .

875 + \$81.250 + Profit S ` + 97.375) .500 + \$37.000 = \$108.375 ` ` ` = VC + FC + P VC = Food & Beverage Cost + Variable LC (40% Total Labor) FC = Fixed LC ( 60% Total Labor) + Overhead S (\$325.000) = VC (\$141.375) + FC (\$146.` Sales = Sales cost + Labor cost + OH \$325.250) + Profit (\$37.

565 ..` ` ` ` Ratio of variable cost to dollar sales Variable rate = VC/Sales VR = VC(\$141.VR 1 .375)/Sales(\$325.435 Contribution Rate ` ` ` CR = 1 .565 CR = .435 = .000) VR = .

565 = \$37.375 .000 .150 Profit = Sales after BE x CR \$66.150 x .` ` ` ` ` ` ` Point at which the sum of all costs equals sales.\$258.849 \$325. thus profit = 0 BE = Fixed Costs/CR BE = \$146.565 BE = \$258.250/.850 = \$66.

compute the following: FC + 0 CR = Break-even point .To determine sales dollars to achieve the profit goal. use the following formula: Fixed Costs + Profit Contribution Rate = Sales Dollars to Achieve Desired Profit To determine break-even point.

use the following formula: Fixed Costs Contribution Rate = Break-Even Point in Sales In terms of the number of units that must be served in order to break even.To determine the dollar sales required to break even. Inc. 2009 . use the following formula: Fixed Costs Contribution Margin per Unit = Break-Even Point in Unit Sales © John Wiley & Sons.