Food & Beverage Management I— Cost Control HT 225 The Control Process-2 Slide 1 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management HT:225 Food &Beverage Management 1 – Cost Control Dr Mohamed El-Sayed Abdel-Aziz February 2014

 The Control Process-2 o An Introduction o The Control Process o Calculating Food Cost o Principles of Cost Percentages Slide 2 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management – HT 225: Food &Beverage Management 1 – Cost Control

 The control in the F&B industry really means controlling people action o Food does not disappear by itself o Excess quantity of liquor o Employees’ wages calculation o Food are not consumed by pest o Customer seldom leave without paying Slide 3 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

1- Establishing Standards Standard, rules or measures established for making comparisons and judgments.  Quality Standards  Quantity Standard  Standard Cost Slide 4 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

2- Establishing Procedures  Procedures the method employed to prepare products or perform jobs.  Standard Procedures established as the correct methods, routines and techniques for day-to-day operations. Slide 5 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

3. Monitor performance and compare 4. Take appropriate actions Slide 6 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT: 225 Food &Beverage Management 1 – Cost Control to correct deviations from standards actual performance with established standards.

The basic formula for food cost (Opening Inventory +Purchases =Value of food available – Ending Inventory = Cost of food issued) or Slide 7 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control FC=P+(BI-EI)

 Determining Actual Food Expense Beginning Inventory Purchases = Goods Available for Sale Ending Inventory = Cost of Food Consumed Employee Meals = Cost of Food Sold Slide 8 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control PLUS MINUS

 FC can be represented as where:  A = Cost of Goods Sold  B = Sales  C = Cost Percentage Slide 9 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control A B = C

 If costs kept constant but sales increase, the cost % goes down.  If costs remain constant but sales decline, cost % increases. Slide 10 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

 If costs reduced but sales remain constant, the cost % goes down.  If costs increase with no increase in sales, the cost % will go up. Slide 11 of 13 King Abdul Aziz University – Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

Group Exercise(3) Slide 12 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control

Thank You Slide 13 of 13 King Abdul Aziz University Tourism Institute Diploma in Hospitality Management HT 225: Food &Beverage Management 1 – Cost Control