Chapter 1

Cost and Sales Concept

 SCHEME OF WORK

Food & Beverage Cost Control- HTH250

Lecturer : Fairuz Abd Hakim

Phone : 016-2837877
e-mail : fairuz295@uitm.edu.my

Grading Scheme Assessment

Particular %
Week Date Topic Reference
Test 1 15%
Week TEST
Test 2 15% Chapters (1-4)
6 1
Group Assignment 20% Week TEST
Chapters (5-8)
12 2
Individual Assignment 50%

Total 100%
 Dittmer, Paul, R. (2006). Principle of Food,
Beverage and Labor Cost Controls, 8th
edition. John Willey & Sons, Inc. New York.

 Dittmer, Paul, R. (2006). Principle of Food,

Beverage and Labor Cost Controls, 9th
edition. John Willey & Sons, Inc. New York.
 Price: RM80.00
Course Outcome Description Program Outcome Description Assessment

Distinguish the Demonstrate best 1) Test

CO 1 different types of practices in the operation 2) Exam
cost in an operation. of foodservice and lodging
PO1 organizations to meet
Describe the food customer expectations
CO 2 and beverage
controls and their
implementation from
initialization to
analysis of results.

Able to performs 1) Test

CO 3 Apply cost-volume- PO2 operational tasks in 2) Exam
profit analysis in a housekeeping, front office
food and beverage and food and beverage
operation. departments.

Assess a range of Able to identify and solve

CO 4 performance PO3 task related problems. 1) Assignment
measures and
appraisal techniques
and apply these in PO7 Able to use technology to
food and beverage achieve operational
operations efficiency and engage in
life-long learning.
 At the end of this chapter, the students will be
able to understand the:
• Cost concepts
• Sales concepts
• Cost percent
 There are four costs a Food Service Manager
must concern themselves with

1. Food costs
2. Beverage costs
3. Labor costs
4. Overhead costs
 There are four costs a Food Service Manager
must concern themselves with

 Food costs are the costs associated with actually

producing the menu items. In most cases, food
costs will make up the largest or second largest
expense category you must learn to manage.

 Beverage costs are those related to the sale of

alcoholic beverages.
 Labor costs include the cost of all employees
necessary to run the business, including taxes
and benefits. In most operations, labor costs are
second only to food costs in total dollars spent.
 Overhead costs include all expenses that are
neither food, beverage nor labor, such as
utilities, linen, etc. (all costs other than prime
cost)
 It can be expressed in variety of units such as
weight, volume or total value.
e.g. one kilo of meat, a bottle of beer

 It can be viewed in various ways

a) Fixed & Variable costs
b) Controllable & noncontrollable costs
c) Unit and total costs
d) Prime costs
e) Historical & Planned costs
 Fixed costs are those that are normally
unaffected by changes in sales volume.

 Variable costs are those that are clearly related

to business volume.
 Directlyvariable costs are those that are directly
linked to volume of business, such that every
increase or decrease in volume brings a
corresponding increase or decrease in cost.
 Semi variable costs have both fixed and variable
elements (e.g., payroll-permanent vs part time)
 Controllable costs are those that can be
changed in the short term. Variable costs are
normally controllable.

 Noncontrollable costs are those that cannot

normally be changed in the short term. These
are usually fixed costs.

 Unit costs may be food or beverage portions or

units of work.

 Total costs may be the total cost of labor for

one period.  
 Prime cost is the sum of food costs,
beverage costs, and labor costs (salaries and
wages, plus employee benefits).

 Historical costs can be found in business

records, books of account, and other similar
records.

 Planned costs are projections of what costs

will be or should be for a future period.
 Definition of Sales
 Revenue resulting from the exchange of products
and services for value

 Expressed in two basic groups

 Monetary & Nonmonetary terms
 Total Sales
 Total volume of sales expressed in dollar terms in any
given time
 E.g. total sales in a week, a month, a year (in
financial statement)
 Total Sales By Category
 Refers
to total dollar volume of sales for all items in
one category
 Total Sales Per Server
 Refers to total dollar of sales for which a given server
is responsible in a given time period
 Useful to make comparison between the performance
of any two or more employees
 Total Sales Per Seat
 Total dollar sales for a given time period divided by
the number of seats in the restaurant
 Time period normally a year
 Used by chain operation for comparing sales results
of its many outlets

 Sales Price
 Amount charged to each customer purchase 1 unit of
particular item
 A single item or a meal
 Average Sale
 Totaldollar sales / the total number of cover
 Two types of common calculation used for F&B;
average sale per customer or average sale per server

 Average Sale Per Customer

 Total dollar sales / number of sales or customer
 Average dollar sale concept is also expressed as the
average check or the average cover
 Used to compare the sales performance employees,
identify sales trend, and compare the effectiveness
of various menus, menu listing or sales promotions
 Average Sale Per Server
 Total sales for a server (John e.g.) / number of
customers for a server (John e.g.)
 Refers to the number of customers served by
that individual
 Considered as a better indicator of sales ability
of a particular individual as it eliminates
differences caused by variations in the numbers
of persons served.
 Total Number Sold
 Refers to the total number of menu items sold in a
given time period
 Useful to distinguish between popular to non-popular
items on menu
 Use to forecast sales therefore help in planning
purchasing & production
 Helps in determining quantities in inventory & sales
records
 Cover
 Usedto describe one diner regardless of the
quantities of item he consumes
 Total Covers
 Refersto the total number of customers served in a given
period (an hour, a day, etc)

 Average Covers
 Total number of covers in a period of time / a number
Covers per hour Total covers/number Efficiency of service
of hours of operation in dining room

Covers per day Total covers / Effectiveness of a

number of days of promotional
operation campaign

Cover per seat Total covers / Effectiveness of a

number of servers particular server
 Seat Turnover
 Refers to the number of seats occupied during a
given period
 Often calculated based on a given meal period

 Sales Mix
 Describethe relative quantity sold of any menu
item as compared with other items in the same
category
 Cost per dollar of Sale = Cost/Sales

 Cost % = Cost/Sales
This formula can show the relationship below:
1. Food Cost % = Food Cost/Food Sales
2. Beverage Cost % = Bev. Cost/Bev. Sales
3. Labor Cost % = Labor Cost/Total Sales
 Food Cost = Food Cost %
Food Sales 

 Beverage Cost = Beverage Cost %

Beverage Sales

 Labor Costs = Labor Cost %

Total Sales
 Percent (%) means “out of each hundred.”

 There are three (3) ways to write a percent:

 Common Form - In its common form, the "%" sign is
used to express the percentage, as in 10%.

 Fraction
Form - In fraction form, the percent is
expressed as the part, or a portion of 100, as in
10/100.

 Decimal Form - The decimal form uses the (.) or

decimal point to express the percent relationship, as
in 0.10.
 In summary, the three possible formula for
cost %
1. Cost/Sales = Cost %
2. Cost/Cost % = Sales
3. Sales x Cost % = Cost