BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

HPME2 – FOOD AND BEVERAGE COST

CONTROL___________________________

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

CHAPTER 1: REVENUE AND COST CONCEPTS

Introduction:
Food Cost and Beverage Cost are the cost of sales in the food service industry.
The accuracy of revenue projections for food and beverage is critical to determining
whether the business operation will be successful or not. Not only does the revenue
have to pay for all of the other expenses listed on the projected profit and loss
statement, but there should be money left for the Profit the owner of the business is
hoping to earn.
Through enough, food service manager is very talented individual. He or she is
unique because all the functions of product sales, from item conceptualization to
product delivery are in their hands. He is the one in charge of securing raw materials,
producing a product and selling it – all under the same roof. However, whoever
manages a food and beverage operation must have a clear understanding of other
concepts not only from procurement of materials to reconciliations or problems if there
may have but also the computations of which to ensure profitability of the business.
Management Tasks Checklist
Tasks Food Service Manufacturing Retail Manager
Manager Manager
Secure Raw Yes Yes No
Materials
Manufacture Yes Yes No
Products
Distribute to end Yes No No
user
Market to end user Yes No Yes
Reconcile problems Yes No Yes
with the end user

COST CONCEPTS
Cost for accountants is defined as the expenses of a food service for goods and
services when the goods are consumed or the services are rendered. Food and
beverage are considered “consumed” when they have been used, wasted or otherwise,
and are no longer available for the purposes for which they were acquired. Thus, the
cost of a piece of potato is incurred when the piece is no longer available for the
purpose for which it was purchased, because it has been cooked, served or thrown
away because it has spoiled or even because it has been stolen. The cost of labor is

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
incurred when people are on duty, whether or not they are working and whether they
are paid at the end of the shift or at some later date.

FIXED AND VARIABLE COSTS

Fixed Cost are those that are normally unaffected by changes in sales volume.
Such as real estate taxes, insurance premiums, depreciation, repairs and maintenance,
rent or occupancy cost, most utility cost, advertisement, professional services.
Variable Cost are those that are clearly related to business volume. As business
volume increase, variable cost will increase and vice versa.
Food & Beverage Cost are considered directly variable cost. Direct Variable
Cost are those that are directly linked to volume of business increase and decrease of
volume correspondingly.
Payroll Cost includes salaries and wages and employee benefits and often
referred as Labor Cost.
Because labor cost consists of fixed and variable element it is known as semi-
variable cost, meaning a portion should change in short-term and the other portion
remains unchanged.
CONTROLLABLE AND NON-CONTROLLABLE COST
Controllable costs are those that can be change in the short term such as
Direct Variable Cost, Wages, Advertising & Promotion, Utilities, Repairs & Maintenance
and Administration and General Expenses.
Non-Controllable cost are those that cannot normally be changed in short-term
such as fixed cost like Rent, Interest on a mortgage, Real estate taxes, License fee and
Depreciation.
Unit Cost may be food & beverage portion as in the cost of one item or hourly
unit of work. In F&B business unit cost are commonly in average unit cost rather than
actual unit cost.
Total Cost are the total of food & beverage portions served in one period such
as a week or a month or total cost of labor for one period.
Prime Cost is a term used in the Hotel Industry refer to the cost of materials and
labor. (Food, Beverage and Payroll)
Historical costs are all cost that are historical - that is can be found in business
records, book of account, financial statements, invoices, employees’ time card and

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
other similar records. It is used for establishing unit cost, determining menu prices and
comparing present with past labor cost.
It will be used for planning and determining the future to develop planned costs -
projections of what cost will be or should be for a future period. It is often called as
Budgeting.

INDUSTRY-WIDE VARIATIONS IN COST

Cost percentage vary considerably from one foodservice operation to other. This
is due to many possible reasons. Basically there are two types of foodservice operation.
 Those that operate at low profit margin and depends on relatively high
business volume.
 Those that operate at relatively high profit margin thus does not require high
business volume.
SALES CONCEPT
Sales Defined
In general, the term sales are defined as revenue resulting from the exchange for
a product (Food & Beverage) and service (Waiter) for value ($$). The sales concept in
F&B operation usually can be express as: monetary and non-monetary.
 Total Sales is a term that refers to the total volume of expressed in dollar term
for instant any given period , such as a week, a month or a year.
By Category. Total dollar volume of sales by category are total food sales or
total beverage sales. Or total steak sales or seafood sales.
By Server. This is total dollar volume of sales for which a given server has been
responsible in a given period. This is to help the management to make judgment on
employees performance.
By Seat. Usually for a year period. Total Dollar sales divided by the number of
seats in the restaurant.
MONETARY TERMS
 Sales Price refers to the amount charged each customer purchasing one unit of a
particular item. It can be a single meal or entire meal.

 Average Sale in business is determine by adding individual sales to determine a

total and then dividing that total by the number of individual sales. Two types of

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
commonly calculated averages are: average sale per customer and average sale
per server.
Per Customer is the result of dividing total dollar sales by the number of sales or
customer.
Per Server is total dollar sales for an individual server divided by number of
customers served by that individual.

AVERAGE SALE
 This average is determined as follows:
Average check = Total dollar sales ÷ Total number of covers/seat
Total dollar sales is $3,902.30 and 140 covers/seat
Thus, Average sale = $3,902.30 ÷ 140
= $27.87
 Yasser, one of the servers, had 30 customers and total dollar sale of $565 on the
Saturday night of February 13, average sale per server for Yasser would be
calculated as follows:
Average sale = Total sales for Yasser ÷ No. of customers for Yasser
= $565 ÷ 30
= $18.83
NON-MONETARY TERMS
•Total Number Sold refers to the total number of menu item sold in a given time period.
•Cover is the term used to describe one diner regardless of the quantity of good the
person consumes.
•Total Cover refer to the total number of customers served in a given period. Help to
make judgment & comparisons
•Average Covers is determined by dividing the total number of cover for a given period
by some other number such as hour of operation, day of operation or numbers of
server.
1. Cover per Hour = Total Covers / No. of Hours of Op.
2. Covers per Day = Total Covers / No. of Days of Op.
3. Covers per Server = Total Covers / No. of Servers
Seat Turnover or simply turnover refer to the number of seats occupied during a given
period (or number of cover) divided by the number of seats available.

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
120 customers served during that one Friday meal. The restaurant has 65 seats, so
seat turnover would be calculated as follows:
Seat turnover = Number of customers served ÷ Number of seats
= 120 ÷ 65
= 1.84615385 turns or 1.85 turns

Sales Mix is a term used to describe the relative quantity sold of any menu item
compared to other items in the same category.
Sales Mix For the Blend and Bite Restaurant
August 20xx
Menu Item Portion Sales Sales Mix
Strip steak 800 11.43%
Ginger shrimp 1,000 14.29
Lamb chop 1,600 22.86
Vege buritto 2,200 31.43
Chicken chop 1,400 20.0
Totals 7,000 100.01%
THE COST-TO-SALES RATIO
Foodservice establishment calculate cost in dollars and compare those cost to sales in
dollars. This enable them to discuss the relationship between cost and sales or the cost
per dollar of sale.
Cost ÷ Sales = Cost per dollar of sale
decimal answer, and any decimal can be converted to a percentage if one multiplies it
by 100 and adds a percent sign (%).
Cost ÷ Sales x 100 = Cost%
$ 312,090 ÷ $ 891,687 = .35 and .35 x 100 = 35.0 %

Food cost ÷ Food sales x 100 =Food cost%

Beverage cost ÷ Beverage sales x 100 = Beverage cost%
Labor cost ÷ Total sales x 100 = Labor cost%
The formula also can be used to determine the Sales price if the cost% is known.
Cost ÷ cost% = Sales (or Sales Price)

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
If the given cost percentage were 30.0 percent and the food cost for the item were
$3.60, the appropriate sales price would be $12.00, illustrated here
30.0 % ÷ 100 = 0.3
$ 3.60 ÷ 0.3 = $12.00
The formula also can be used to determine the cost if the spending power and cost% is
known.
Suppose this banquet manager is dealing with a group willing to spend $15.00 per
person for a banquet, and the same given 30.0 percent cost percent is to apply.
Calculation of the maximum permissible cost per person is facilitated by rearranging the
formula once again: Sales x Cost % ( expressed as a decimal ) = Cost
Sales X Cost % = Cost
So the cost per person can be calculated as $4.50:
30.0 % ÷ 100 = 0.3
$ 15.00 X 0.3 = $ 4.50

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

ACTIVITY 1:
Name: __________________________________________ Date: _______________
1. Given the following information, calculate cost percentages. Round your answers to
the nearest tenth of a percent.
a. Cost, $200.00; Sales, $500.00 ____________________
b. Cost, $150.00; Sales, $500.00 ____________________
c. Cost, $178.50; Sales, $700.00 ____________________
d. Cost, $216.80; Sales, $800.00 ____________________
2. Calculate cost, given the following figures for cost percent and sales:
a. Cost percent, 28.0%; Sales, $500.00 ____________________
b. Cost percent, 34.5%; Sales, $2,400.00 ____________________
c. Cost percent, 24.8%; Sales, $225.00 ____________________
d. Cost percent, 31.6%; Sales, $1,065.00 ____________________
3. Calculate sales, given the following figures for cost percent and cost:
a. Cost percent, 30.0%; Cost, $90.00 ____________________
b. Cost percent, 25.0%; Cost, $500.00 ____________________
c. Cost percent, 33.3%; Cost, $1,000.00 ____________________
d. Cost percent, 27.3%; Cost, $1,300.40 ____________________
4. Sales records for a luncheon in the Shark’s Restaurant for a recent week were: Given
this information, calculate the sales mix.
Item Portion Sales Sales Mix
Item A, 196 ____________________
Item B, 72 ____________________
Item C, 142 ____________________
Item D, 24 ____________________
Item E, 112 ____________________
Item F, 224 ____________________
Item G, 162 ____________________

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
Total ______ ____________________
5. Calculate the average check from the following data:
a. Sales, $1,000.00; Number of customers, 125 ____________________
b. Sales, $1,300.00; Number of customers, 158 ____________________
c. Sales, $8,720.53; Number of customers, 976 ____________________

6. The following table indicates the number of covers served and the gross sales per
server for one three-hour period in Ryoukin’s Restaurant.
Determine:
(a) the average number of covers served per hour per server
(b) the average sale per hour period per server
Server Covers Served A Gross Sales Per Server B
Fadhli 51 _____ $237.40 _____
Azuan 46 _____ $263.95 _____
Nadia 38 _____ $188.25 _____
7. Use the information about Ryoukin’s Restaurant identified in Question 6 to complete
the following:
a. Calculate the average check.
b. Calculate the turnover for the three - hour period if there are 65 seats in the
restaurant.
A. _____________________
B. _____________________

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

CHAPTER 2: SALES HISTORY AND FORECASTING

Developing Sales History is no more than the systematic record of all sales
achieved during a given of time. In the restaurant business, sales are generally
recorded in terms of peso sales and customers served.
A sales history is written record of the number of portions of each menu items
sold every time that item appears on the menu. It is a summary of portion sales. In
some food establishments, sales histories are maintained for every item on the menu,
from appetizers to desserts. In others, the only records are only for those items which
are being tracked like for instance new product launched and the existing similar
products for comparison. Sales history is very necessary in tracking down the sales
performance of a particular product and is, therefore; used in predicting future sales of
the forecasting and or the Popularity Index.
Popularity Index = Sales for item/Total Portion Sales for all Menu Items x 100
Predicting Future Sales
Sales to date is the cumulative total of sales reported in the unit. It is also the
number we get when we add today’s sales to the sales of all prior days in the reporting
period.
Item Monday Tuesday Wednesday Thursday Friday
Menu 1 94 38 91 89 96
Menu 2 62 67 47 67 95
Menu 3 109 102 107 101 64

It is important to know from the vertical analysis of the data, menu 1 to menu 3 are it its
peak on Monday, while in horizontal analysis it is menu 3 which gives the highest sales
contribution. From this point of view, a business operator may already use this as a
basis in preparing the following:

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
a. Extra amount of ingredients for menu 3 should be made available and higher that
the other 2 menus.
b. A marketing strategy may be made for menu 2 since it gives the lowest sales
contribution.
c. Manpower plotting must be adjusted to oversee the preparation of menu.
After an accurate sales history system has been established, a business operator may
begin to see whether the operation experiences some level of sale variation. This sales
variances or changes from previously experienced sales level give an indication of
whether sales are improving, declining or staying the same.
Many operators use the Significant variation to determine whether a cost is
managed or not. A significant variation is any variation in expected cost that
management feels is a case for concern. This variation can be in costs that were neither
higher nor lower than the normal standard amount that was expected.
Formula for Variance Computation:
Variance = Sales this year – Sales last year
% Variance = Sales this year – Sales last year X 100
Sales last year
Example:
Sales this Year Sales last Year Variance Variance %
87,345.23 89,456.23
79,345.54 83,218.68
81,234.67 81,123.67
127,234.23 80,345.22

Comparative Study:
This pertains to comparison of data out of the gathered figure drawn from the
history of one particular establishment.

% Variance = Sales this year – Sales Target X 100

Sales Target
% Variance = ______Variance_________ X 100
Sales Target
Sales History, Variance and Percentage Variance
Month Sales Sales Variance Varianc Sales Varianc Variance
this Target e% last e %

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
year year
Jan 23456 20000 25000
Feb 56789 58000 54000
Mar 57888 55000 60000
Apr 44250 45000 47000
May 33650 40000 37000
June 63457 65000 60000
July 48650 46000 49000
Aug 49232 48000 47000
Sep 52350 55000 50000
Oct 47500 44000 48000
Nov 58400 59000 55000
Dec 68320 65000 63000
ACTIVITY 2:
Name: __________________________________________ Date: _______________
Instruction: Compute the following problem.
Month Sales Sales Varianc Variance Sales Varianc Variance
this Target e % last e %
month month
June 1 2345 2000 345 17.25% 2500 -155 -6.2%
June 2 5612 5800 5400
June 3 5236 5500 6000
June 4 4689 4500 4700
June 5 3889 4000 3700
June 6 5511 6500 6000
June 7 4710 4600 4900
June 8 4750 4800 4700
June 9 5500 5500 5000
June 10 4351 4400 4800
June 11 5928 5900 5500
June12 6445 6500 6300

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

CHAPTER 3: THE CONTROL PROCESS

Introduction:
The control in the Food and Beverage industry really means controlling people action.
These are the factors:
 Food does not disappear by itself, without help;
 Excess quantity of food and beverage into the plate and glass;
 Employees’ wages calculation are not base on the wrong numbers of hours
unless someone gives the wrong information;
 Food are not consumed by pest unless made available by human; and
 Customer seldom leaven without paying unless make possible.
Managing Income & Expenses
Food Service Management
It is important that the foodservice manager must be a talented individual. These criteria
are true:
 The person must be able to grab opportunities & profit oriented A unique sales
person
 Good personality with the guest
 Hard working person and most important
 The person is the controller or regulator of the operation to achieved maximized
profits and minimize costs
INCOME

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
 Income can be managed in many ways thus to insure profit. Increasing income
can be done by increasing the number of guest and the amount of money they
spent.
 This goal can be achieved by suggestive selling, creative menu pricing and
discount.
 Our main goal in this course is not to sale but controlling expenses.
EXPENSES
There are four major expense categories that must be controlled by management.
These are…
Food Cost, Beverage Cost, Labor Cost & Other Expenses

THE CONTROL PROCESS

1.Definition of Control
Control is a process used by managers to direct, regulate and restrain the
actions of people so that the established goals of an enterprise may be achieved.
2.Cost Control Defined
Cost Control defined as the process used by managers to regulate cost and
guard against excessive costs. It is an ongoing process throughout the operation. Two
principle of the principal causes of excessive cost are inefficiency and waste.
3. Sales Control Sales
Control is important to ensure that all sales results in appropriate income to the
business. Therefore, it is important to require that each employee record each sales
accurately. (Checks, duplicates, bills or etc.)
4. Responsibility For Control
Responsibility is clearly fall onto the management, but the task on controlling
differ due to the nature of the establishment.
Small establishment the control responsibility usually taken by the management
but for larger establishment it is delegated to the assistant manager or controller.
5. Instituting Control

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
Food & beverage establishment usually involves process of raw material
purchased, received, stored and issued for the purpose of manufacturing products for
sale and services.
At each stage of operation, it is necessary to institute control in order to stop
pilferage or problems.
Each control must be suitable to each of the operation, depends on the nature of
material and service requiring control and on the degree of difficulty inherent
(fundamentals) in instituting the control.
THE CONTROL TECHNIQUES
1. Establishing Standard
•Standard are defined as rules or measures established for making comparisons and
judgments.
•Quality Standards are used to define the degree of excellence of raw materials,
finished products and by extensions, work performed.
•Quantity Standard are defined as measures of weight, count or volume used to make
comparisons and judgment.
•Standard Cost is defined as the cost of goods or services identified, approved and
accepted by management in order to make judgment and comparisons of the
effectiveness of the operation. Thus, standard cost must be calculated as accurately as
possible.
2. Establishing Procedures
Procedures are the method employed to prepare products or perform jobs.
Standard Procedures are those that have be established as the correct methods,
routines and techniques for day-to-day operations.
Example:
Production procedures must be standardized for several reasons. One of the most
important of these is customer satisfaction. Any given item should be produced by the
same method and with the same ingredients every time it is served. It should also be
served in the same quantity each time, partly so that regular customers will be given the
same quantity each time they order the item, and partly to maintain cost standards.
3. Training
Training is a process by which managers teach employees how work is to be done,
given the standards and standards procedures established.
Example:

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
If management has established a standard 4 - ounce portion size for hamburgers, then
all employees responsible for producing portions of hamburgers must be made aware
that 4 ounces is the correct portion size.
4. Setting Example
Employees in an operation follow the examples set by the manager - the manager’s
behavior, manner, responses to questions, and even a failure to speak or take action in
some situations.
The behavior of individuals in a group tends to be influenced by the actions, statements
and attitudes of their leaders.
Work Habits, attitudes, behavior, spirit of a manager are the evident.
If the manager who has occasion to help employees plate food for the dining room
serves incorrect portion sizes, employees will be more likely to do the same when the
manager is not there. Similarly, if a manager is inclined to wrap parcels of food to take
home for personal use, employees will be more likely to do so.
5. Observing and Correcting Employee Actions
One of a manager’s important tasks is to observe the actions of all employees
continually as they go about their daily jobs, judging those actions in the light of the
standards and standard procedures established for their work.
If any employees are failing to follow the standards, it is a manager’s responsibility to
correct their performance to the extent necessary at the appropriate time.
6. Requiring Records and Reports
Recording and reports is an important element in control as these information helps in
decision making, judgment & comparisons of the operations. One such report is the
statement of income.
Example:
It is important to recognize that managers need timely information to determine whether
primary goals and sub goals are being met. If timely records and reports are not
available, opportunities for taking corrective action may be lost.
7. Discipline Employees
Discipline is defined as action taken to give a warning, punish or telling off an
employee for work performance or personal behavior incompatible with established
standards It is seldom practice but only used as a deterrent or if corrective action failed.
By selecting the right people for the various jobs — those with the experience, skill, and
personal characteristics that match the job requirements the number of individuals

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
requiring some level of discipline can be reduced to a bare minimum. However, every
manager must face the fact that, at times, an individual staff member must be
disciplined.
8. Preparing and Following Budgets
Preparing and following budgets may be the most common technique for controlling
business operations.
Budget is defined as a financial plan and may be describe as a realistic expression of
management’s goals and objectives expressed in financial terms. (Cash flow budget,
capital equipment budget and advertising budget.)
Operation Budget is the most important budget for F&B manager. It is a forecast of
sales activity and an estimate of cost that will be incurred in the process of generating
those sales.

PREPARING AN OPERATING BUDGET

1. An operating budget is normally prepared using historical information from previous
budget and other financial records.
2. The second step is to calculated the percentage and analysis of the previous records.
3. Then making assumption or judgment base on all the influencing factors that might
affect the business operation during the forecasted period, and computing into the new
budget.
Flexible budget normally prepared for levels of business volume above and below the
expected level. (See Illustration)

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

The Control Process

Consist of the following four steps:
1. Establish standard and standard procedures for operation.
2. Train all individual to follow established standards and standard procedures.
3. Monitor performance and compare actual performance with established standards.
4. Take appropriate actions to correct deviations from standards.
Cost control
Two of the principal causes of excessive costs are inefficiency and waste. For
example, storing vegetables in a room temperature may lead to wilt and dry resulting to
wastages. When these vegetables are thrown into the trash can, the cost of food will
increase but sales are not. Clearly, the management must take steps to guard against
such excessive costs, thereby, requires Cost Control. Cost Control is identified as the
process used by managers to regulate costs and guard against excessive costs. It is
ongoing process and is involved every step in the chain of purchasing, receiving,
storing, issuing and preparing food and beverage for sale.

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

ACTIVITY 3:
Name: __________________________________________ Date: _______________
1. What is the purpose of cost control?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
2. What is the purpose of sales control?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________

3. The following information has been prepared by the manager of the Market
Restaurant. Using this information, prepare an operating budget for the Market

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
Restaurant for the coming year, following the illustration provided in this chapter.
Food sales: $870,000
Beverage sales: $280,000
Cost of food: 35 percent of food sales
Cost of beverages: 26 percent of beverage sales
Salaries and wages: $104,500
Employee benefit: 25 percent of total salaries and wages
Other controllable expenses: $90,000
Depreciation: $60,500
Interest: $53,000
Occupancy costs: $50,000

CHAPTER 4: FOOD COST

STANDARDIZE RECIPES
A standardized recipe contains a variety of information about the recipe, its yield
and the number of portions it produces. The actual form may vary from one operation to
another, but the information contained is the same.
While it is the menu that determines what is to be sold and at what price, the
Standardized Recipe controls the end product. The Standardized recipe ensures that
each time customers order an item from the menu, they get the same item.
Standardized recipe contains, the following information:
a. Item name
b. Total yield
c. Portion size
d. Ingredients list
e. Preparation/Method section
f. Cooking time and temperature
g. Special instructions, if necessary
h. Recipe cost

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

Standardized Recipe
Unit name:
Menu Item: Slow Roasted Beef Belly

Yield: 7 Special Instruction: Serve with steamed, asparagus,

Portion Size: 100g Zucchini and roasted tomatoes.
Portion Cost:
Amount Ingredients
1 pc ( ¾ kg) boneless beef belly or short plate
½ cup whole peppercorn (crushed)
½ cup rock salt
2 heads garlic
Horseradish Sauce:
1 cup prepared horseradish
1 cup milk
1 tsp. chopped parsley
salt and pepper (to taste)

Procedure/Method:
1. Preheat the oven to 280ºF
2. Combine crushed peppercorns, salt and garlic into paste. Rub on top of beef.
3. Place beef on a rack onto a roasting pan. Test for tenderness with kitchen fork
after 4 hours.
4. To make the horseradish sauce, combine all the ingredients ang mix well.
5. Once beef is done, remove from oven and rest for at least 1 hour before slicing.
Serve with horseradish sauce.
6. You may cook beef up to 2 days ahead and keep it in refrigerator. To reheat,
slice beef while cold into 1/3-inch-thick slices. Arrange beef slices overlapping
each other in a baking tray, pour ½ cup of stock or water over the beef. Cover
with foil, bake in a 350ºF oven for about 15-20 minutes or until heated through.
Many operators refuse to take time to develop standardized recipes. The following list
contains some of the arguments often used against developing standardized recipes.
1. They take too long to use.
2. My people don’t need recipes. They know how we do things here.
3. My chefs refuse to reveal his or her secrets.

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4. They take too long to write up.
5. We tried them but lost some, so we stopped using them.
6. They are too hard to read, or many of my people cannot read English.
Reasons for incorporating a system of standardized recipes include the following:
1. Accurate purchasing is impossible without the existence and use of standardized
recipe.
2. Dietary concerns require some food service operators to know exactly the name
of ingredients and the correct amount of each.
3. Accurate recipe costing and menu pricing is impossible without standard recipe.
4. Matching food consumed to cash sales is impossible without standard recipe.
5. New employees cannot be trained without it. If the chef quits for instance, you
are stuck!
6. The computerization of a food service operation is impossible unless the
elements of standardized recipes are in place.
Reason why there must be an effective use of standardized recipe:
1. Customers dissatisfaction if menu selected is not standard in taste.
2. Producing too many of any of the menu item would create excess products.
3. Profitability level would likely to be in its lowest point due to its food cost.

When adjusting for recipe quantities, the following two general methods maybe
employed:
1. FACTOR METHOD:
Yield Desired/Current Yield = Conversion Factor

Example: Current recipe is 50 portions, and the number of portions we wish to make is
150, then the formula applies: 125/50 =2.5

Ingredients Original amount Factor New amount

A 4 lbs 2.5 10 lbs
B 1 qt 2.5 2 ½ qts
C 1½T 2.5 3¾T

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2. PERCENTAGE METHOD:
a. Deals with the recipe weight rather than with a conversion factor.
b. Sometimes more accurate than using a conversion factor alone.
Example: Assume than an operator has a recipe with a total weight of 168 ounces. If
the portion size is 4 ounces, the total recipe yield would be (168/4) 42 servings. If the
operator wishes to prepare 75 servings, he or she would need the following total recipe
weight:
75 servings x 4 oz. per serving = 300 oz.
Percentage Method
Ingredients Original Oz. % of Total Total % of New
Amount Requested Amount Total Recipe
Amount
A 6 lbs & 8oz 104 61.9 300 61.9 185.7
B 12 oz 12 7.1 300 7.1 21.3
C 1 lb 16 9.5 300 9.5 28.5
D 2 lbs & 4 oz 36 21.5 300 21.5 64.5
TOTAL 10 lbs & 8 168 100 300 100.0 300
oz

ACTIVITY 4.1. FACTOR METHOD

Name:______________________________________________ Date: ___________
Instruction: Calculate the following:
Aling Nena’s current recipe of chicken adobo is 30 servings only. She wanted to adjust
the number of servings. She wishes to make is 90 servings. Compute the adjustment
using the following:

Ingredients Original amount Factor New amount

A 2 kilo 3 6 kilo
B ½ kilo 3 1.5 kilo
C ½ cup 3 1.5 cup

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D ½ cup 3 1.5 cup
E 1T 3 3T

ACTIVITY 4.2. PERCENTAGE METHOD

Mang Gusting is an owner of restaurant and has a recipe with a total weight of 150
ounces. If the portion size is 3 ounces, the total recipe yield would be (150/3) 50
servings. If the owner wishes to prepare 60 servings, what would be the adjustment?
Ingredients Original Oz. % of Total Total % of New
Amount Requested Amount Total Recipe
Amount
A 7 lbs 112 oz 53.85 180 53.85 96.93
B 10 oz 10 oz 4.07 180 4.07 7.326
C 2 lbs 32 oz 15.38 180 15.38 27.684
D 6 oz 6 oz 2.88 180 2.88 5.184
E 3 lbs 48 oz 23.8 180 23.8 42.84
TOTAL 13 lbs 208 oz 99.98 or 180 99.98 or 179.96 or
100 100 180

Terms Used in determining the Cost of Food

Beginning Inventory is the amount or value of all food on hand at the beginning of the
accounting period. It is determined by completing an actual count ad valuation of the
products on hand.
Purchases are the sum of food cost purchased during the accounting period. It is
determined by adding all properly tabulated invoices for the accounting period.
Goods Available for Sale is the sum of the beginning inventory and purchases. It
represents the value of all foo that is available for sale during the accounting period.
Ending Inventory refers to the amount or value of all food on hand at the end of
accounting inventory. It is also determined by completing a physical inventory.

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Cost of Food Consumed is the amount or value of all food used or consumed by the
operation. Again, it is important to note that this is not merely the value of all food sold
but rather the value of all food no longer in the establishment and includes the value of
any meals eaten by employees.
Employee Meals is a labor related not food related cost. Free or reduced cost
employee meals are a benefit much in the same manner as medical insurance or paid
vacation. Therefore, the value of this benefit, if provided should be transferred and
charged not a cost of food but as a cost of employee benefits.
Cost of Food Sold is the actual amount or value of all food expense incurred by the
operation except for those related to employee meals. It is not possible to determine this
umber unless a beginning inventory has been taken at the start of the month followed
by another inventory at the end of the month.
Formulas:
Cost of Food Sold
% Food Cost = x 100
Sales

Beverage Cost Sold

x 100
% Beverage Cost =
Sales

Payroll Cost + Other Employee Cost

% Manpower Cost = x 100
Sales

Cost of other expenses

% Other Expenses = x 100
Sales

VARIATIONS ON THE BASIC COST OF FOOD SOLD FORMULA

One of the most important point to remember; however, is that all of these
formulas should seek to accurately reflect the actual cost of food sold by the operation
for a given time period.
Table 1: Cost of Food Sold
Cost of Food Sold
Unit Name: Resto Juan
Accounting Period: January 1, 2021 to January 31, 2021

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Beginning Inventory Php 50,000.00
(Add) Purchases 30,000.00
Goods Available for Sale Php 80,000.00
(Less) Ending Inventory 15,000.00
Cost of Food Consumed Php 65,000.00
(Less) Employee’s Meals 1,580.00
Cost of Food Sold Php 63,420.00

Once Cost of Food Sold is determined, we may now compute for the % Food Cost
using the formula:

Cost of Food Sold

% Food Cost = x 100
Sales

Table 2: Cost of Food Sold when products are transferred form one unit to another.
Cost of Food Sold
Unit Name: Resto Juan
Accounting Period: January 1, 2021 to January 31, 2021
Beginning Inventory Php 50,000.00
(Add) Purchases 30,000.00
Goods Available for Sale Php 80,000.00
(Less) Ending Inventory 15,000.00
Php 65,000.00
(Less)Transfer Out 7,150.00
Php 57,850.00
(Add) Transfer In 9,000.00
Cost of Food Consumed Php 66,850.00
(Less) Employee’s Meals 1,580.00
Cost of Food Sold Php 65,270.00

Table 3: No Employee Meals are provided.

Cost of Food Sold
Unit Name: Resto Juan
Accounting Period: January 1, 2021 to January 31, 2021
Beginning Inventory Php 50,000.00
(Add) Purchases 30,000.00
Goods Available for Sale Php 80,000.00
(Less) Ending Inventory 15,000.00

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Cost of Food Sold Php 65,270.00

Table 4: If there are wastages or spoilages

Cost of Food Sold
Unit Name: Resto Juan
Accounting Period: January 1, 2021 to January 31, 2021
Beginning Inventory Php 50,000.00
(Add) Purchases 30,000.00
Goods Available for Sale Php 80,000.00
(Less) Ending Inventory 15,000.00
(Less) Wastages/Spoilages 3,485.00
Cost of Food Sold Php 61,515.00

Problem No. 1
Determine the food cost % of an Ice Cream Store with sales of Php 98,000.00
given the following conditions:
Beginning Inventory Php 22,500.00
Purchases 39,000.00
Ending Inventory 27,500.00
Employee’s Meals 725.00

Solution: Cost of Food Sold

Unit Name: Ice Cream Store
Accounting Period: June 1 – 7, 2020
Beginning Inventory Php 22,500.00
Purchases (+) 39,000.00
Good Available for Sale 61,500.00
Ending Inventory (-) 27,500.00
Cost of Food Consumed 34,000.00
Employee Meals (-) 725.00
Cost of Food Sold Php 33,275.00
Therefore:

Cost of Food Sold

% Food Cost = x 100
Sales

33,275.00
x 100
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% Food Cost =
98,000.00

% Food Cost = 34%

INVENTORY VALUE SHEET

Unit Name: Artist’s Store Inventory Date: Sunday, January 21, 2020
Counted By: Barry Low Extended by: Demy Moore

Item Unit Item Amount Item Value Inventory

Value
Straw Packs 2.5 packs P45.00/pack P112.50
Plastic Bag (S) Packs 3 packs 50 P34.00/pack P119.00
pcs.
Noodles Case 4 cases P250.00/case P1000.00
Choco Chips Kilograms 750 grams P350.00/kg P262.50

ACTIVITY 4.3
Name: _____________________________________________ Date: ____________
Instruction: Calculate the given problem.

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
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Saint Michael’s Hospital Food Service Director has a problem. He has the
following information about his operation however, he forgot to compute the food cost
sold for the entire month. Use Herman’s figure to calculate for the actual food cost sold
and its equivalent % of his operation if sales is Php105,000.00
July 1 Beginning Inventory Php 22,184.50
Purchases
meat 21,501.00
dairy 6,300.00
fruits/vegetables 11,641.00
all other foods 42,384.00
Trans Out
meat 4,675.00
dairy 965.00
fruits/vegetables 1,241.00
all other food 2,218.00
Ending Inventory
meats 1,845.00
dairy 1,965.00
fruits/vegetables 1,278.00
all other foods 2,234.00
Wastages 2,786.00

ACTIVITY 4.4
Instruction: Compute the inventory value of the following items:

Item Unit Item Amount Item Value Inventory

Value
Potato Kilograms ¾ kilograms P45.00/kg
Carrots Grams 750 grams P34.00/kg
Bell Pepper Grams 250 grams P50.00/kg
Celery Kilograms ½ kilograms P60.00/kg
Lemon Piece 3 pieces P25.00/pc
Ground pork Kilograms 3 kilograms P350.00/kg
Pork chop Kilograms 2.5 kilograms P400.00/kg
Pork loin Kilograms 1.75 kilograms P350.00/kg

CHAPTER 5: BEVERAGE COST

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At the end of the period, the student should be able to:
1. Use sales histories and standardized recipes to develop a beverage purchase
order;
2. Compute the value of bar transfers both to and from the kitchen;
3. Compute an accurate cost of goods sold percentage for beer and spirits;
4. Understand and appreciate the importance of beverage costing in food industry.
Beverage Cost are those related to the sale of alcoholic beverages. It is interesting
to note that its common practice in the hospitality industry to consider beverage costs of
non-alcoholic nature as an expense in the food cost category. However, for alcoholic
beverages, cost category includes beer, wine and liquor. This category may include the
costs of ingredients necessary to produce these drinks such as cherries, lemons, olives,
limes mixers like carbonated beverages and juices and other items commonly used in
the production and service of alcoholic beverages.
Alcoholic Beverage are simply those products that are meant for consumption as a
beverage and that contain a significant amount of ethyl alcohol. These products are
generally classified as:
1. Beer – a fermented beverage made from grain and flavored with hops.
2. Wine – a fermented beverage made from grapes, fruits or berries.
3. Spirits – a fermented beverage that are distilled to increase the alcohol content
of the product.
Many operations include alcohols a major component of the products they offer to
guests. There are three types of operations that serve alcoholic beverages. These can
be grouped as:
1. Beverage Only
In this facility, snacks such as pretzels, chips and nuts are served but beverage
service is clearly more important. Beverage only bars are oftentimes
neighborhoods gathering places.
Examples:
Neighborhood bars, taverns, hotel bars, airport bars, bus terminal bars,
breweries and wineries.
2. Beverage and Food
Beverage and food operations are the predominant types of beverage
operations. Restaurants serving wine, beer and liquor, as well as bars that serve light
meals are examples of this type of service. Many alcoholic beverages were created
because they are enjoyed most when combined with foods. Beverage and food
operations can include quick service restaurants, full service restaurants; self-service

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and cafeterias, airport bars, sports complex such as arenas, stadiums, grocery store
carryout, brew pubs, hotel room, service banquets and country clubs.
3. Beverage and entertainment/activity
this exist because many people want to something while they consume their
favorite alcoholic beverage. There is enormous variety in the types of entertainment and
activities that can accompany beverage service, ranging from dartboards and pool
tables to elaborate stage shows in nightclubs and cabarets. Beverage and
entertainment/activity operations can include comedy clubs, taverns, entertainment
clubs, sports complexes, full service restaurants, brew pubs, night clubs, country clubs,
dance and music clubs and bowling ranges.
FORECASTING BEER SALES
Alcoholic beverages can forecast sales either by:
a. By bottle or can
b. By the glass
Forecasting Sale by Bottle or Can
Forecasting sales by the bottle is essentially the same as forecasting any regular
menu item. This is, given a choice of beverage products, some percentage of you
guests will likely choose beer. However, the questions you must answer to effectively
manage your costs are, “what percentage of my guests will choose beer: and “which
kind of beer?” and “in what packaging format will they choose that beer?”.
By either manual tracking, you will know exactly which beers by brand and
packaging form you have sold in a bar on a daily basis. A tally of guests will also furnish
you with the same information, but such a system is labor intensive, time consuming
and subject to inaccuracy. Regardless of racking method used, the goal us the same as
that of tracking a food item sale. That is, with good idea of what guests have purchased
in the past, we are better prepared to order the products in their proper packaging form
that we believe these guests will purchase in the future.
To determine the sales of each beer product, it is important to know the unit cost
either by bottle or by case since most of the time, bar owners purchase beer by case
and not by piece for the reason that it is cheaper to buy in bulk rather than by buying per
piece.

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Example:
Al Fresco Bar Beer Sales
Beverage Sales Date: July 1-8
Product Number of Percentage Unit Price/Case Sales
Bottle Sold Sold (24 bottles/cans)
Budweiser Bottle 45 11.25% P915.00 P1,715.63
Coors Bottle 18 4.5% P1,350.00 P1,012.50
Miller Cans 61 15.25% P925.00 P2,351.04
Budweiser Draft 68 17% P890.00 P2,521.67
in Cans
Coors can 115 28.75% P750.00 P3,593.75
Harps draft 93 23.25% P820.00 P3,177.50
Total 400 100% P14,372.09

COST OF BEVERAGE SOLD AND % BEVERAGE COST

Similar to finding the cost of Food Sold and its equivalent percentage, the Cost of
beverage Sold can be determined through inventory method, that is by summing up all
the beginning inventory value, purchases, borrowed stocks and subtracting from it the
ending inventories, products that are transferred from the bar, breakages among others.
Using the data of LeRae’s Bar and considering some other data given below, %
beverage:
Cost is computed using the formula:

Cost of Beverage Sold

% Beverage Cost = x 100
Sales

Other data: Sales: 55,000.00

Beginning Inventories
Budweiser Bottle 6 cases
Coors Bottle 3 ½ cases
Millers Cans 14 cases
Budweiser Draft 9 cases
Others P21,316.00
Transfer from other store 5 cases Millers Can

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
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Transfer to other store 12 cases Budweiser Draft
Breakages 1 case Budweiser Draft
1 case Millers Can
Ending Inventory P14,350.00

Cost of Beverage Sold

Unit Name: LeRae’s Bar
Accounting Period: January 1, 2021 to January 7, 2021
Beginning Inventory Php 52,491.00
(Less) Ending Inventory 14,350.00
Php 38,141.00
(Less)Transfer Out 10,680.00
Php 27,461.00
(Add) Transfer In 4,625.00
Php 32,086.00
(Less) Breakages 1,815.00
Cost of Beverage Sold Php 30,271.00

It is important to that the marginal Profit in Beverage business is generally much higher
than in food business. The proper computation of beverage cost percentage is identical
to that of cost percentage with one important difference. Typically, there is no equivalent
for employee meals since the consumption of alcoholic beverage products by
employees who are working should be prohibited. Thus, employees drinks would never
be considered as a reduction from all beverage cost.
FORECASTING WINE BY THE GLASS
Generally, forecasting the sale of house wines, wine served to a guest who does
not stipulate a specific brand when ordering or any sine sold by the glass is done in a
manner similar to that used in forecasting beer sales. However, forecasting SPIRIT BY
THE GLASS is very difficult and tracking maybe brand but distinct items and flavorings.
What is important here is that, the operator must be able to carry out the recording of
each item sold for monitoring and computation purposes. Examples are Kahlua on the
rocks, Kahlua and coffee, Kahlua and cream and Kahlua and coke.
Consider a 750 ml wine at P950/bottle. a.) How many servings would there be if
each shot contains 1.5 oz? b.) What is the cost per shot or per serving? C.) If the
product is sold 80% higher that it’s the original cost, what is the estimated profit?
(Assume 1L = 33.814 ounces.)
Computation:
750 ml = 25.3605 oz 1 liter = 33.814 oz

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a. 16.907 servings by 1.5 oz.
25.3605 oz / 1.5 oz = 16.907 servings by 1.5 oz
b. P56.1897439 or P56.19
P950.00 per bottle / 16.907 servings = P56.1897439 or P56.19
c. P760.00
P950 per bottle x .80 (80%) = P760.00

Beverage Sales Date: Jan. 1-7, 2021

Product Number Sold by Glass Percentage Sold
Chardonay 30 18.75
Merlot 16 10
Zinfadel 62 38.75
House Zinfadel 52 32.5
Total 160 100

Beverage Purchase Order

As a general rule, wine, beer and spirits are purchased by the case. Beer of
course may also be bought by full or reduced size kegs. As with food products, small
container size usually results in higher cost per ounce. It is important to remember that
quality product and size of the container are critical when deciding what to buy.
Receiving Beverage Products
The skills required to receive beverage products is somewhat less than what is
needed for receiving food. The reason is that beverage products do not vary in quality in
the same manner food products do. As with food, the receiving clerk need proper
location, tools, and equipment. In addition, proper delivery schedules must be
maintained. The training required in beverage receiving however, is reduced due to the
consistent nature of the product received. A case of freshly produced Coors beer, for
example, will be consistent in quality regardless of the vendor and if the product is
freshly produced, that is the date is stamped on the product to indicate its freshness,
very little inspection is required to ensure that the product received is exactly what was
ordered. When receiving beverage products, the following items are of concern and
should be verified.
Key Beverage Receiving Checkpoints
a. Correct brand
b. Correct bottle size
c. No broken bottles or bottle seals

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d. Freshness dates (beer)
e. Correct vintage or year produced (wine)
f. Refrigerated state (if appropriate)
g. Correct unit price
h. Correct price extension
i. Correct invoice total
If errors are detected, a credit memo should be filled up and signed by both the delivery
person and the receiving clerk.
Inventory Turn Over
Effectiveness of computations and inventory is reflected in the frequency or
ordering and or purchasing better known as Inventory Turn-Over. The higher the
frequency of ordering, the higher the Inventory turn-over is. Inventory turn-over is
determined by the formula.

Cost of Beverage Sold

Inventory Turn Over = x 100
Average Inventory

Whereas: Average Inventory is

Beginning Inventory + Ending Inventory

Ideal Inventory is estimated up to 2 only. If the value is more than this, then,
stock build up must be reviewed and revised when necessary.
Sample Problem:
Operating Data – Rigg’s Bar
Beverage sales Php 250,000.00
Beginning Inventory 24,405.00
Ending Inventory 18,741.00
Purchases 21,986.00
Transfer to bar 2,140.00
Transfer from bar 1,572.00
Breakages 872.00

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
% Beverage Cost is computed similar to the consumption of %Food Cost, however,
different variables are being used.

Cost of Beverage Sold

Unit Name: Rigg’s Bar
Accounting Period: Dec. 1, 2020 to Dec. 7, 2020
Beginning Inventory Php 24,405.00
Purchases 21,986.00
Goods Available for Sale 46,391.00
(Less) Ending Inventory 18,741.00
Php 27,650.00
(Less)Transfer Out 1572.00
Php 26,078.00
(Add) Transfer In 2,140.00
Php 28,218.00
(Less) Breakages 872.00
Cost of Beverage Sold Php 27,346.00

Cost of Beverage Sold

% Beverage Cost = x 100
Sales

Php 27,346.00
% Beverage Cost = x 100
Php 250,000.00

= 10.94%

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
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CONTROL___________________________

ACTIVITY 5
Name: _____________________________________________ Date: ____________
Instruction: Calculate the given problem.
1. Compute the Beverage Sales and Percentage Beverage Sold
Product Number of Percentage Unit Price/Case Sales
Bottle Sold Sold (24 bottles/cans)
Root Beer 15 P915.00
SanMig Apple 48 P1,350.00
Red horse 36 P925.00
SanMig Light 68 P890.00
RH can 118 P750.00
SanMig Apple 83 P820.00
can
Total

2. Compute the Cost of Beverage Sold and % Beverage Cost

Beverage sales Php 80,158.00
Beginning Inventory 14,765.00
Ending Inventory 13,419.00
Purchases 25,000.00
Transfer to bar 4,321.00
Transfer from bar 5,678.00
Breakages 990.00

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
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CONTROL___________________________

CHAPTER 6: MANPOWER COST

Include the cost of all employees necessary to run the business. This expense
category would also include the amount of any taxes that you are required to pay when
you have employees on your payroll. Some operations find it helpful to include the cost
of management in this category. Others prefer to place the cost of managers in the
category of other expenses.
Payroll is the term generally used to refer to the salaries and wages you will pay
your employees. Labor or manpower cost includes salaries and wages but also include
other labor related costs. In addition to salaries and wages, the following expenses are
related to employees and thus, are considered labor cost:
 Social security taxes
 Group Life Insurance
 Health Insurance including dental, medical, and disability
 Pension and retirement benefits
 Training expense
 Employee transportation
 Employee uniforms, housing and other benefits
 Vacation leave/sick leave/personal days
 Tuition reimbursement programs
 Employee incentives and bonuses
Payroll refers to the gross pay received by an employee in exchange for his on
her work. That is, if an employee earns $10.00 per hour and works 40 hours for his or
her employer, the gross paycheck would be $400.00. Labor expense is always larger
than payroll expense.
Keys Factors Affecting Employee Productivity
1. Employee selection
2. Training
3. Supervision
4. Scheduling
5. Breaks

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
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6. Morale
7. Menu
8. Equipment
9. Service level desired

In computing for Manpower Cost percentage, the formula below is being used:

Labor Cost
% Manpower Cost = x 100
Sales

Determining the number of hours work is described by the following break list. To
compute for the payroll, you may exclude in the computation the break given to each. In
many establishments where employees are paid on an hourly basis, only the 15
minutes or coffee break is paid. 30 minutes break and up are automatically deducted
from the number of manhour.
Example:
Derreck: 7:00 am – 4:00 pm : coffee break: 15 minutes, 60 minutes lunch break
Total hours: 9 hours less (60 minutes lunch break)
Manhour to be paid: 8 hours
Note: Computation may also vary depending on the mandated regulations
Department Name of Working Break Break Break
Crew Hours
Front Desk A Emmeleine 7:00-3:00 15 30 60
Bambam 3:00-11:00 15 30 60
Front Desk B Mean 8:00-3:00 15 30 60
Elaine 3:00-11:00 15 30 60
Front Desk C Irene 9:00-4:00 15 30 60
Syscyl 4:00-9:00 15 30 60
Dinning/Lobby Ermard 7:00-3:00 15 30 60
Glenn 8:00-4:00 15 30 60
Jojo 9:00-5:00 15 30 60
Junjun 10:00-6:00 15 30 60
Housekeeping Ej 11:00-7:00 15 30 60
Grant 12:00-9:00 15 30 60
Lito 3:00-10:00 15 30 60
Abbiee 4:00-11:00 15 30 60

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BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
Concierge Alex 7:00-3:00 15 30 60
Erin 3:00-11:00 15 30 60
Justine 7:30-2:30 15 30 60
Kitchen Pat 2:30-10:30 15 30 60
Ram 7:00-3:30 15 30 60
Julius 4:00-10:00 15 30 60
1. If an employee receives Php 42.00 per hour how much is the payroll cost per
day?
2. How much is the total payroll cost per month assuming that each employee takes
1 rest day for the month on January?
Other than the manhour, it is important to include in the payroll cost to also
include the overtime pay and the Night differential.
Manpower cost includes not only the payroll cost but the expenses incurred by
the employees such as benefits such as government security system and alike. It is also
known as indirect compensation – which is referred to as a benefit to a current
employee other than direct compensation. It is a social contract between employer and
employee and is typically designed to attract and keep loyal employees. It may include
paid vacations, health benefits, life insurance, free meals, free living accommodations,
use of recreational facilities operated by the employer, discounts on accommodations at
other properties within the chain and many other possibilities including the use of
company vehicle, reimbursement for outside classed, sick leave and emergency leave
pay. The part that the employer pays for is considered an indirect cost or indirect
compensation.
In manpower cost control, it is also important to create a staffing guide. A staffing
guide is a chart or graph that indicates the number of employees needed based on the
forecasted number of customers per hour. The chart or graph begins with zero
customer and ends with the maximum number of customers that can be seated in the
dinning room at one time. The staffing guide balances zero customers with a “skeleton”
staff who prepare the operation for the arrival of the customers and a ‘skeleton” staff
who clean the operation at the end of the day.
Employee scheduling is then based on the forecasted number of customers.
There is a separate staffing guide for each job category. Job categories might include
cashier, host/hostess, food server, beverage server, bartender, sous chef, line cook,
dishwasher and so on.
Example:
Staffing guide: Dining room servers for 8’s Bar and Resto.
Number of Customers Number of Food Servers
0 1
1 to 15 2

Prepared by: VICTOR B. BASSIG, LPT | 40

BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
16 to 30 3
31 to 45 4
46 to 60 5
61 to 75 6
76 to 90 7
Number of servers required may vary depending on the type of service a
particular restaurant may use. In some cases, staffing guide is based on the forecasted
peso sales and not on the forecasted number of customers. Manpower plotting
therefore is very crucial determinant of profitability of the business. If schedules are not
properly planned, it may cause walkouts from among the customers leading to sales
loss and customer dissatisfaction.

ACTIVITY 6
Name: _____________________________________________ Date: ____________
Instruction: Answer the question:
1. Why it is important to prepare a employee’s schedule for work?
________________________________________________________________
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Prepared by: VICTOR B. BASSIG, LPT | 41

BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________

CHAPTER 7: OPERATING COST

Operating costs are expenses that relate to a business’s operations. It can also
refer to the costs of operating a specific unit of the business. These costs usually fall
into two categories, called fixed costs and variable costs, and a business may have
more of one type than the other. operating costs can also be described as the cost of
doing business which may vary month to month. Some of these expenses are small,
while others need to be monitored to ensure profit.
This is also in area that management must watch carefully. The other area on
which management must keep a watchful eye is the cost of utilities. The restaurant
business is an energy-intensive business.

Cost of the operation

% Operation Cost = x 100
Sales

Given below is the Income Statement of Gastronomy Plaza, Year Ended December 31,
2013. Determine the Restaurant profit both in Peso and %.
% of Sales
Sales
Food P900,500.00 84.75%
Beverage 162,000.00 15.25%
Total Sales P1,062,500.00 100.00%
Cost of Sales
Food P323,080.00 35.88%
Beverage 40,038.00 24.72%

Prepared by: VICTOR B. BASSIG, LPT | 42

BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT
HPME2 – FOOD AND BEVERAGE COST
CONTROL___________________________
Total P363,118.00 34.18
Gross Profit P6699,382.00 655.82%
Controllable Expenses
Salaries and Wages P212,000.00 19.95%
Employee benefits 43,000.00 04.05%
Other Controllable Costs 128,670.00 12.11%
Total Controllable Costs P383,670.00 36.11%
Income before other costs P315,712.00 29.71%
Rental 75,400.00 07.09%
Interest 12,655.00 01.09%
Depreciation 42,430.00 03.99%
Total P130,485.00 12.28%
Restaurant Profit P185,227.00 23.83%
ACTIVITY 7:
Name: _____________________________________________ Date: ____________
Instruction: Compute the problem using the information below and example on the
discussion.
Sample Costs:
Maintenance 42,000.00
Utilities (electricity, water, telephone, internet) 80,000.00
Supplies (store and office supplies) 8,565.00
Employee training, uniform 18,500.00
Transportation 6,000.00
Gasoline 8,000.00
LPG 31,500.00
Government permits and licenses 20,000.00
Janitorial services 11,000.00
Legal and Professional fees 20,000.00
Administrative costs 125,000.00
Security services 28,000.00
Advertisement 7,500.00
Freight Charges (deliveries charges) 10,000.00
Representation (sponsorship, free meals) 25,000.00
Using the formula, compute for the % operating cost of the above example.
Show your computations here:

Prepared by: VICTOR B. BASSIG, LPT | 43