CHAPTER 1- COST AND SALES CONCEPT

Identify the differences between the 2 restaurants- A Taste of Tuscany and The Grandview Bistro. Analyze the income statement and give reasons why there are differences between the 2 restaurants. Cost- expense to the restaurant Sales- Revenue to the restaurant

Definition of cost The expense to the foodservice establishment for goods or services when the goods are consumed or the services are rendered.

Types of Costs 1. Fixed Cost- normally unaffected by changes of sales volume. E.g. regardless of the restaurant sales, owner still have to pay for rental, salaries and wages, taxes every month.

2. Variable Cost- clearly related to business volume. As business volume increase, variable cost increase. E.g food, beverage and labor. Variable can also be divided to semi variable cost. Cost of labor, for example. Permanent staff or administration staff are treated as fix cost personnel. Part-time or over time staffs are treated as variable because it depends on the needs and sales of the restaurant.

3. Controllable Cost- those that can be changed in a short term. For e.g- variable cost. 4. Non-controllable cost- that cannot normally be changed in the short-term. For e.grental and depreciation. 5. Historical cost- that can be found in business record, books of account, financial statement and etc. It is useful for future planning.

6.Planned Cost- projections of what costs to developed in future. Usually manager will refer to historical cost to develop planned cost. 7. Prime Cost- refer to the costs of material and labor: food, beverages and payroll. The level and control of prime cost play a large part in determining whether an establishment will meets its financial goals.

SALES CONCEPT There are 2 basic groups of terms normally used in FNB operations to express sales concept: monetart and non-monetary

Monetary Terms 1. Total sales- refers to the total volume of sales expressed in dollar terms. 2. Total Sales By Category- E.g- total food sales, total beverage sales. 3. Total Sales Per Server- Total dollar volume of sales for which a given server has been responsible for a given time period.

4. Total Sales Per Seat- Total dollar sales Total Seats 5. Sales price- the amount charged to each customer purchasing 1 unit of the item. 6. Average sale- is determined by adding individual sales to determine a total then dividing that total by the number of individual sales. 7. Average sale per customer- Total dollar sales Total no of customer 8. Average Sale Per server 9. Average Sale for Bill

Non monetary terms 1. Total No Sold- total no of particular item sold in a given period. 2. Covers- one diner/ pax 3. Total Covers- total no of customers served in a given period. 4. Average Cover- per hour, per day, per server. 5. Seat turnover- No of customers served No of seats 6. Sales Mix- to describe the relative qualtity sold of any item as compared with other items in the same category. Must be in percentage.

The Cost to Sales ratio: Cost Percent

1. Cost/ Sales= Cost per dollar of sales = Cost% 2. Cost/ Cost%= Sales 3. Sales x Cost%= Cost 2. Food Cost/ Food Sales= Food Cost% 3. Bev Cost/ Bev Sales= Bev Cost%

Industrywide Variations in Cost Percents

1.

2.

Those that operate at low margin of profit per item served and depend on relatively high business volume. E.g: fast food Those that operate at relatively high margin of profit per item and therefore do not require such high business volume. E.g: normal restaurant/ fine dining

Monitoring Cost and Sales- data, sales report.