Beverage Cost Control: Managing for Profit

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Presentation transcript:

Beverage Cost Control: Managing for Profit Chapter 19 Beverage Cost Control: Managing for Profit

Chapter Objectives Compute the cost of beverages sold. Determine prices using product cost percentage and contribution margin methods. Understand the variables that influence beverage menu pricing and their effects on profits. Understand beverage pricing methods for banquets and other catered events. Understand the importance of standardized recipes and how they influence profits. Understand the difference between keeping a physical and perpetual inventory. Employ techniques to track and control beverage costs.

Cost of Beverages Sold Cost of beverages sold ÷ Beverage sales = Beverage cost percentage The formula represents the ratio between the beverage department’s product cost and its sales.

Product Cost and Contribution Margin Product cost method: Cost of product ÷ Desired cost percent = Selling price Contribution margin method: Selling price ̶ Cost of product = Contribution margin

Variables That Influence Pricing Prices paid to purveyors Market demands Competition pricing Cost controls Loss leaders Geographic location

Pricing Banquets Per person per hour: Total beverage charge determined on a per person/per hour fee. Pre- and post-function inventory: A pre- and post-inventory is conducted; client is charged on actual usage of product consumed.

Standardized Recipes Ensure consistency in drinks produced Ensure costing of product is accurate Ease the preparation process once bartenders are trained Assist in setting par levels Aid the purchasing and storing process

Source: U.S. Department of Labor (June 2001) Keeping Inventory Physical Inventory: Normally conducted monthly. A full count of product on the premises is conducted and the product valued. Perpetual Inventory: Additions to and deletions from inventory are accounted for as they occur. Utilized for more expensive product.

Tracking and Control Set par levels Set purchasing procedures Determine receiving and storing policies Set issuing guidelines Use standardized recipes

CONCLUSION