1. Monitoring food service operations III-Actual V/S standard Costs BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 1 /18 Thursday, April 14, 2011

2. Recap of Daily food cost Define actual inventory value. Define book inventory value. Food cost percent today. Food cost percent to date. Gratis to bar. Promotion expense. Transfers from Bar to kitchen. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 2 /18 Thursday, April 14, 2011

3. KCM of the Session Define standard cost and explain how it is calculated. List three ways an undesirable forecasted food cost percentage could be changed. Define potential savings and list several conditions that affect it. Distinguish between daily and periodic calculation of standard cost and potential savings. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 3 /18 Thursday, April 14, 2011

4. Scope Comparing actual costs and standard costs. Menu Pre-Cost and Abstract. Comparing forecasted sales & cost with actual sales and cost. Comparing Actual with Standard Food Costs, Food Sales, and Potential Savings. Example. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 4 /18 Thursday, April 14, 2011

5. Comparing actual costs and standard costs In general, there are two methods for comparing actual and standard costs. Daily method of calculating actual costs and comparing it with standard costs. Offers immediate results. Time consuming. Results are accurate. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 5 /18 Thursday, April 14, 2011

6. Comparing actual costs and standard costs Periodic Method of calculating actual cost with standard costs. Less time consuming than the daily method. Information not available readily. Corrective action cannot be taken immediately because the expense has been made. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 6 /18 Thursday, April 14, 2011

7. Menu Pre-Cost and Abstract BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 7 /18 Thursday, April 14, 2011

8. Menu Pre-Cost and Abstract The pre-cost abstract is a sheet based on the standard cost. It contains sales on one side and the food cost percentage in the other column. It may also be referred to as the daily food cost percentage. Another column is usually added which is known as forecast. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 8 /18 Thursday, April 14, 2011

9. Menu Pre-Cost and Abstract with Forecast The forecast is of sales. The approximated sales are supported by an equivalent projection of cost and its percentage. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 9 /18 Thursday, April 14, 2011

10. Volume Forecast and sales Forecast A projection of the sales volume In Terms of Units as forecast Compared with actual units sold. Difference or variance to projection. The volume forecast is multiplied with the cost price and later the sales price which becomes sales forecast. The Sales forecast is compared with actual sales to get a forecast variance BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 10 /18 Thursday, April 14, 2011

12. Actual and Standard Food Costs, Food Sales, and Potential Savings BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 12 /18 Thursday, April 14, 2011

13. Example Luvin the owner of Red Lobster Inn has developed a new menu for the use of his establishment. Each menu item represents a complete meal. He has calculated standard cost of each item and has kept careful records of sales for the month of March as shown below: BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 13 /18 Thursday, April 14, 2011

14. Example BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 14 /18 Thursday, April 14, 2011

15. Example Food sales for March totaled $ 50, 028.50 Using the following information provided, calculate the total standard cost for the period. In the next page are the figures from the accounting records of the Red Lobster BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 15 /18 Thursday, April 14, 2011

16. Example Opening Inventory $ 7414.80 Closing Inventory $ 6327.35 Food Purchases $ 17642.80 Transfers Beverage to Food $ 443.00 Transfers food to Beverage $ 837.00 Calculate the cost of food sold for the month. Using the information from the previous question calculate each of the following: BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 16 /18 Thursday, April 14, 2011

17. Example Actual cost percent. Standard cost percent. Potential savings in dollars. Potential savings as percentage of sales. BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 17 /18 Thursday, April 14, 2011

18. Questions & Comments BAC-4131 Food and Beverage Management Cost Control::Monitoring food service operations III Actual V/S Standard costs Slide 18 /18 Thursday, April 14, 2011