4/25/2017 Cateringmanagement:FactorsAffectingCostControl

FactorsAffectingCostControl

1.FoodCostsFoodisthemostreadilycontrolleditemofexpenditure
andthefactormostsubjecttofluctuationinthefoodservicebudget.If
control of food costs is to be effective, efficient methods must be
employed in planning the menu, purchasing, storing, preparing and
servingfood.Theexpenditureforfoodvariesgreatlyfromonetypeof
institution to another and often for institutions of the same type
because of the form of food purchased geographic location and
deliverycosts.
Foodcostisusuallyexpressedintermsofpercentoftheincomespent
forfoodandmayrangefrom18to20%to70or80%oftheincome.
Thesewidevariationsareduetomanycausesanditisdifficulttogive
percentagefiguresthataretypicalforanytypeoforganization.
Inluxuryrestaurantswithelaborateserviceandhighoverheadcosts,
onlyabout1820%oftheguestsfoodmoneymaybespentforfood.
In college cooperative residences for students, where much of the
labor is provided by the residents and some of the overhead is often
paidbytheschool,thefoodcostmaybeashighas7080%ofincome.
Inspiteofthevariationintheamountsspentforfood,theunderlying
bases for food cost control are the same for all types of food
serviceunits.

1.Menus: Menu planning is the first and perhaps the most

important step in control of food costs. The menu determines
what&howmany foods must be purchased and prepared. The
extent of the no. of choices of each menu also influences food
costs. Menu that provide extensive choices require preparation
of many kinds of foods, several of which may not be sold in
quantities sufficient to pay for their preparation. School food
services offering a plate lunch and a limited no. of other foods
usually are better able to stay within their limited budget than
thosethatofferalargeselectionofalacarteitems.
Menus, although made in advance must be adjusted daily
according to the inventory on hand and to local market
conditions. Waste can be controlled only by wise utilization of
availablesupplies,whichhelpstokeepfoodcostsundercontrol.

2.Typeofservice:Offeredmaybeafactorindeterminingfood
costs. For example food service using table service will have a
higher food and labor cost than a cafeteria style service. Self
service helps in savings because each individual can decide the
quantityhepreferandthusreducewastage.
3.Purchasing methods: Food costs begin at the time of
purchaseandcontrolledproceduresareaneffectivestepforwise
buying.
Bulkpurchasingrigidsetofspecificationforqualityoffoodto
bepurchased.

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4.Receiving control: this is another step in controlling food

costs.Itisthemanagementsresponsibilitytomakecertainthat
whatwasorderedisreceivedbothintermsofquantity&quality.
Onlargeorders,onecaseofeachproductmustbeexaminedto
determinethequality.Weighingoffooditemsonreceipt.
5.Storage & storeroom control: Purchase should be made
onlyoffoodthatcanbeusedatonceorstoredadequately.Only
what is essential should be stored for a limited period because
unnecessarilylargeinventoriestendtoincreasethepossibilityof
lossthroughspoilage,waste,pilferageortheft.
Correct temperatures and humidity for optimum storage of
variousperishablefoodsarenecessaryforcontroloffoodcosts.
Storageofcannedfoodsinwellventilated&coolstorageofflour
with good circulation of air to retain good quality & flavor.
Prevention of infestation by rodents, insects reduces waste and
helpsincostcontrol.
Storeroom control can be achieved by making one person
accountable or responsible for the food stuffs contained in it.
Locking,issuesmadeafterreceivingwrittenrequisition.

6.Production of foods: Preparation, cooking & left overs

control: The quality & form of food purchased has a direct
bearingontheamountofwasteintheprocessofpreparation&
cooking. The actual cost of food is influenced not only by the
relationshipbetweenamountorweightoftheedibleportionand
that of the waste or inedible portion, but also by the quality of
the edible portion. Cutting, training off excess results in waste
which cuts into profits and should be avoided. Unskilled
personnel, inadequate suppression, lack of proper equipment,
overproductionleadstolossofprofitinfoodservicebusiness.
7.Standardized portions and serving wastes: standardized
portionsandportioncontrolbyusingstandardcupsordippers
preventsthewastage.
8.Methodofpricing:Itistheresponsibilityofthefoodservice
managertodeterminethespecificpriceofthefood.Haphazard
methods only lead to financial disaster dissatisfaction of the
customerorboth.Individualitemsoracombinationofitemsto
be served together must be priced. Mark up factor. All costs
must be covered food, labor, operating & overhead, plus the
desiredamountforprofit.
9.Employees meal costs: Providing meals for employees is
necessaryanddesirableinmostfoodservices.Thisisameansof
providing wholesome, nutritionally balanced meals at reduced
ratesorfreeofchargeasaconveniencetoemployeesandhelps
to build and maintain a healthy & happy and efficient working
force.
Mealsmaybechargedatcostorwiththeadditionofamarkup
oradiscountofagivenpercentage(3050%)oftheretailselling
price is the basis used to determine the rate. Flat rate may be
charged, deduction may be made from the salary for one meal
perday.

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2.Labour Costs Sometimes labor costs may be higher than the food
cost percentage. They are less controllable than food costs. Labor is
notafixedexpense,becauseitisinfluencedbymanyconditionssuch
as

1.Typeofoperationandextentofservicesoffered,
2.Hoursofservice,
3.Themenupatternandtheforminwhichthefoodispurchased
4.Thephysicalplant,thesizeandarrangementofthepreparation
and serving units and their relation to each other, the amount,
kind and arrangement of labor saving equipment, employee
selectionpolicyetc.supervisionwagescale&fringebenefits.
1.Type of service: cafeterias require less number of labour. In
Table service the labour requirement is based on the ratio of
waiterstoguestswillvary
2.Hours of work / service: will determine number of shifts
number of meals to be served. In school lunch only one meal
whereashospitalfoodserviceshouldprovide4to5meals/day.
3.Menu pattern: Major controlling factor in determining
numberofemployeesrequiredandskill(varieswithtypeoffood
serviceorg.amt.ofbuiltinlabourwhichismoreprofitable.
4.Physical plant: Efficient kitchen arrangement helps in
controlling labour cost. Poor planning, arrangement results in
inconvenience and waste of human energy additional labour
may be required to left, handle & carry or move materials in a
poorlyarrangedkitchen.
5.Equipment & arrangement: labour saving equipment is
related to no. of labour hours required to accomplish a given
priceofwork.
6.Personnel policies: proper selection and skill increases the
productivitywhichhelpsinlabourcostcontrol.Training
7.Supervision: helps to achieve better standards greater
utilization of labour & equipment, and more compact
functioninglayouts.
8.FringeBenefits:aregiventotheemployeesasencouragement
to increase the productivity apart from the regular salary. This
alsoincludesgoodshareoflabourcosts.Thiscanbeminimized
bybetterschedulingorredistributionofworkloads.

3.Operating and Other Expenses: other items classified as

overhead & operating expenses constitute 12 to 18% of the budget
such as utilities, laundry, repairs, replacement & maintenance
telephone,printing,rentetc.
4.Recorde: Complete & accurate records are among the basic
requirements for control of costs. Records provide information to
guide present operations & form basis for future financial planning.
Recordsareusefulinevaluatingandinimprovingfinancialsituation
ofthedept.recordsarearrangementtoolandlikeallformsofcontrol,
varywiththetype,sizeandpoliciesoftheinstitution.
Computer is utilized today for record keeping and reporting. No
records however carefully designed will be of value unless they are
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keptdaily,areaccurateandareusedbymanagement.
1.ProcurementandReceivingRecords:

1.Purchase order: Written record of items ordered by

telephoneorbymail.Itliststheitems,quantitiesdesired&
specifications.Maycontainthepricequotations&timeof
delivery.
2.Invoices: The delivery slip that accompanies an order is
the invoice. Written by the vendor, contain lists of items
purchased with no unit price & total cost. Used for
checkingagainsttheitemssupplied.
3.Receivingrecord:Listofgoodsreceivedisrecordedina
ledgertypebookunderthedatereceived.
4.Purchase record: A permanent record of date of
purchase, vendor from whom goods were purchased,
quantity received and price paid for each individual item.
Thisisusefulincostingofrecipes.
5.Summary of purchases record: This shows the total
amount of each item purchased each month. Helps to
quantity the item purchased for a given period of time.
Useful in forecasting quantities of food needed for future
use.
2.Storageandstoreroomcontrol:

1.Storage records: Records of goods received and stored

inthestoreroom.
2.Storeroom issue or requisition record: No item
should be removed from the storeroom except on written
order of the concerned manager. This written order of
items to be issued from the storeroom to the kitchen is
known as storeroom issue or requisition sheet. This will
help in keeping the necessary information regarding
balanceofeachitemafterissue.
3.Perpetualinventory:Runningrecordofthebalanceon
hand for each item of goods in the store room. The items
received are added to the balance on hand and the items
issuedaresubtracted.Itmaybeintheformofindexcards,
oneforeachitemcardextypedrawerfilemaybeused.The
totalquantityofeachitemonhandcanbeascertainedbya
quickcheckoftheperpetualinventoryfile.
4.Physicalinventory:Thisisanactualcountofthegoods
on hand at the end of the accounting period. Usually one
month. This is a better way of keeping control over the
storeroom this can be checked against the perpetual
inventory. Equipment especially service equipment like
china,glassware,silverwareneedstobecheckedregularly
andevaluated.
3.Productionandservicerecords:

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1.Menu: Records important for controlling costs in food

productionaremenu,standardizedrecipes,&aproduction
report.
2.Standardized recipes: Helps to minimize food costs
andhelpsmanagerstokeepwithinthedeservedbudget
3.Production schedules: This is a record of amounts of
foods to be prepared, the resulting quantities of cooked
foodsavailabletobeserved,andtheactualno.ofservings
obtainedfromagivenamountoffood,leftoverquantities
whichhelpinforecasting.
4.Menu tally: Used in commercial food service to keep a
tally of menu items sold. This tally may be checked with
theproductionrecordofnumberofservingssoldetc.slips
maybeused.
4.Diningroomandpatientcountrecords:Usefulinhospital
foodservice.Helpstopredictnumberstobeserved.
1.Censusrecord:Aformofrecordingthemealcount
2.Specialmealsrecord: For food services which provide
specialmealstospecialgroupsinadditiontotheirregular
mealservice.

5.Cash Transaction: A permanent record of cash transactions,

both from sales or income and from expenditures or
disbursements.Helpsinfinancialaccountability.

1.Cashreceiptsrecord

6.Operating&maintenance:

1.Laundryrecords:Numberofitemssentforlaundering
2.Other controllable costs: Record of operating costs.
Repairs,maintenanceetc.

7.Personnelcostcontrolrecords:

1.Timecardpayrollrecord:Tomaintainanaccuratereport
ofthehoursofworkspent.Helpstopreparepayrolls.
Budget: has been defined as an estimate of future needs, arranged
according to an orderly basis, covering some or all of the activities of an
enterpriseforadefiniteperiodoftime.
Financial planning for the future. Budgeting should also include the
numberofmealstobeservedandlabourhoursrequired.

Stepsinplanningbudget
1.Recordeverysourceofincome
2.Classifytheitemsofexpenses
3.Studytheoperationsofthedepartmentbasedonpreviousrecords.
4.Setprioritiesandmakedecisions
5.Writethebudgetforpresentation.
6.Usethebudget.

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