CHAPTER 1:

INTRODUCTION
TO COST
CONTROL
 COST AND SALES CONCEPTS
COST
CONCEPTS
ꭘ The term "cost in accounting refers to the monetary worth of expenses for raw
materials, equipment, supplies, services, labor, and goods, among other things.

ꭘ In the food and beverage industry, the cost is defined as an expense to a

foodservice facility for goods or services when the items are consumed or the
services are delivered.
 FIXED AND VARIABLE COSTS

FIXED COSTS VARIABLE COST

 are typically unaffected by  are associated to the number of
the volume of production or goods or service produced, or
sales, they remain constant the business volume.
regardless of whether goods
or services are produced.
 CONTROLLABLE AND
NONCONTROLLABLE COSTS
ꭘ Controllable and noncontrollable costs are also
terms used to label costs. Costs that can be
changed in the short term are known as
controllable costs.

ꭘ When a choice is made by a group of

individuals, the cost is not controllable from the
perspective of a single person. Noncontrollable
costs cannot be changed in the short term.
 UNIT COST AND TOTAL COST
UNIT COST

ꭘ defined as the cost of one unit of work , or piece of food and beverage.
ꭘ Unit Cost = Total Cost / Total Number of Units Produced
 UNIT COST AND TOTAL COST
TOTAL COST
ꭘ is the cost in terms of totals.
ꭘ Total Cost = Units Purchased / Unit Cost
 Unit Cost Total Cost

Fixed Cost Changes Does not change

Variable Cost Does not change Changes

 PRIME
COST
ꭘ Prime cost are the expenses incurred by a corporation
that are directly tied to the materials and labor
employed in the manufacturing process.
ꭘ The formula for calculating a company's prime cost
is "Direct raw materials + Direct labor = Prime
cost."
ꭘ For example, the prime costs for creating a cake includes direct labor and raw
materials, such as flour, eggs, sugar, and other ingredients, as well as the
electricity, gas, and other necessary machines needed for the production. The
materials directly contributing to the cake's production cost P350.00. The
baker charges P100 per hour for labor, and this cake takes three hours to
complete. The prime cost to produce the cake is P650.00

Direct raw materials + Direct labor = Prime cost

P350.00 + P300.00 = P650.00
 HISTORICAL AND PLANNED COST

Historical costs can be found in business

records, books of account, financial statements,
invoices, time cards, and other comparable
documents. Planning is one of the most critical
management roles. As a result, historical costs are
necessary for effective planning
 SALES
CONCEPTS
ꭘ Generally, the term "sales" can be defined as the exchange of money for
goods, services, or other property in a transaction between two or more
parties.

ꭘ The following paragraphs define the term and examine some of the many
applications it has in the sector. The terms monetary and nonmonetary are
two fundamental sets of terms commonly used in food and beverage
operations to convey sale concepts.
 MONETARY TERMS
Total Sales - refers to the total amount of all invoices for a specific time period,
such as a week, month, or year.
Total Sales by Category - these are total sales reported for a certain time period,
broken down by product category and sub-category, such as total food
sales or total beverage sales, referring to a total volume of sales for all
items in a single category.
Sales Price - refers to the amount charged per unit of a particular item.
Average Sale - it is calculated by adding individual sales to arrive at a total and
then dividing that total by the number of sales.
 Company ABC Daily Sales and Covers, Sunday, December 18, 2020

Menu Item Quantity Sales Price Total Sales (per sub-category)

Soup (per category) 3,505.00

Crab and Corn 6 150.00 900.00

Asparagus 8 180.00 1,440.00

Tomato 3 175.00 525.00

Chowder 4 160.00 640.00

Salad (per category) 2,000.000

Mixed Greens 5 80.00 400.00

Beet Salad 2 125.00 250.00

Caesar Salad 9 150.00 1,350.00

Meal Plate (per category) 16,670.

Roast Beef with Vegetables 18 325.00 5,850.00

Grilled Salmon with Dill Sauce 15 340.00 5,100.00

Chicken Curry with Rice 22 260.00 5,720.00

Dessert (per category) 2,595.00

Leche Flan 17 60.00 1,020.00

Buko Pandan 21 75.00 1,575.00

Total Covers 57

Total Sales ₱ 24,770.00

Total Sales per Server - this is the total volume of sales for which a particular
server is accountable during a certain time period.
Total Sales per Seat - the overall sales of a business divided by the number of
seats in the establishment over a specific time period.
Average Check - it is the result of dividing total currency sales by the number
of sales or customers.

The formula for calculating this average is as follows:

Average Check = Total Sales / Total Number of Covers

 Foodservice operators use the average peso sale to compare one
employee's sales performance to that of another, to uncover sales trend, and to
analyze the effectiveness of different menus, menu listings, or sales
promotions. The average sale, as computed by average checking, in this case
is:

Average sale = ₱24,770.00 / 57 = ₱434.56

This calculation is only for food and excludes beverages. When determining
average sale per customer, many establishments split food and beverage sales.
Average Sale per Server - refers to the total sales of an individual
server divided by the number of customers served by that individual.
This, too, is a figure used for comparative purposes, and it is usually
considered a better indicator of the sales ability of a particular individual
because, unlike total sales per server, it eliminates differences caused by
variations in the numbers of persons served.
 For example, if company ABC had ten servers on duty, and Clyden, one of
the server, had 20 customers and total dollar sale of ₱4,892.00 on the Sunday of
December 18, average sale per server for him would be:

Average sale per server = Total sales of Server A / Number of customers for Server
A
= ₱4,892.00 / 20
= ₱244.6

Clyden's average sale per server would be compared to that of other servers.
If Clyden's average sale per client was significantly lower than that of other servers,
management might investigate and decide to instruct him in the selling aspects of
service.
 NONMONETARY
TERMS
Total Number Sold - is the measured total number of burgers, iced tea, or
other menu items served in a specific time period. Furthermore, past sales
information of total numbers of certain things sold can be used to forecast
sales. These projections are useful in making purchase and production
decisions.

The term “cover” is used in the industry to designate a single

diner, regardless of how much food he or she consumes.
Total Covers - refers to the total number of customers served in a specific
time frame, such as an hour,a meal period, a day, a week, or another time
frame.
 NONMONETARY
TERMS
Average Covers - determined when the total number of covers for a given
time period is divided by some other value.
Seat Turnover - refers to the number of seats occupied ( or the number of
customers served ) over the number of seats available at a certain period.
Sales Mix - is used to describe the relative quantity sold of any menu item
as compared with other items in the same category. The relative quantities
are normally percentages of total unit sales and always total 100 percent.
 MONITORING COST AND
SALES
Cost alter with business volume to some
extent, but only when expressed in relation to that
quantity do they become significant. This allows
them to discuss the cost-to-sales ratio, which is also
known as the cost per peso of sales, the cost-to-sales
ratio, or simply the cost-to-sales ratio.
 COST
The methodCONTROL
through which managers
limit costs and prevent against
excessive costs is known as cost
control.
THE CONTROL
PROCESS
Train all individuals to follow established standards
and standard procedures.

Established standards and standards Take appropriated action to correct

procedures for operation. deviations from standards.

Monitor performance and compare actual

performances with established standard.
1.Establish standards and standard procedures for
operation.
Quality standards - are used to determine the level of excellence in raw
materials, completed goods, and, by
extension, work.

Quantity standards - specified as measures of weight, count, or volume, are

used to create comparisons and conclusions.

Standard cost - described as the cost of goods or services established,

approved, and accepted by management.
 Procedures are the steps taken to prepare products or complete tasks.
Standard procedures are those that have been established as the correct methods,
routines, and techniques for day-to-day operations.

 Ordering and purchasing procedures

 Receiving procedures
 Standard storing procedures
 Issuing
 Production procedures
2. Train all individuals to follow established standards and
standard procedures.
• Training personnel
• Disciplining employees

3. Take appropriate action to correct deviations from standards.

• Requiring records and reports
• Setting examples

4. Monitor performance and compare actual performances with

established standards..
• Observing and correcting employee actions
2. Train all individuals to follow established standards
and standard procedures.

• Training personnel
• Disciplining employees

3. Take appropriate action to correct deviations from

standards.

• Requiring records and reports

• Setting examples
THAN
K
YOU!!
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𑁋 Mercury the closest planet to the Sun and the 𑁋 Earth is the only planet that harbors life in the
smallest in the System Solar System
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its reddish cast and agriculture
𑁋 Venus has a beautiful name and is the second 𑁋 The Sun is the star at the center of the Solar
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JUPITER VENUS
Jupiter is a gas giant and the It’s the second-brightest natural
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It’s the closest planet to the Sun Mars is full of iron oxide dust, Earth is the only planet that
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It’s the second-brightest natural object Mercury is the smallest planet in the
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The Sun’s mass compared to Earth’s

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 KEY NUMBERS ARE IMPORTANT

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giving the planet its reddish cast biggest planet in the entire Solar is the second planet from the Sun
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