1. Y2.U3.1 Cost Overview

2. Intro Why What/types How

3. Why In order to survive revenue must be higher than cost. Revenue: income from sales before expenses, or costs are subtracted. Cost: is the price an operation pays out in the purchasing and preparation of its products, or the providing of its service. Cost control is a business’s efforts to control how much it spends

4. Cost Classifications Controlable: Variable: go up and down in direct proportion to sales Semivariable: go up and down but not in direct proportion Noncontrolable: Insurance, mortgage, utilities Fixed: remain the same regardless of sales volume, overhead

5. Types FoodVariable, Controllable BeverageVariable, Controllable LaborSemivariable, Controllable & Noncontrollable OverheadFixed, Noncontrollable

6. Operating Budgets A financial plan for a specific period of time, lists the anticipated sales revenue and projected costs, giving an estimate of profit and loss for a period of time, usually monthly Analyzing controllable cost needs, such as labor, food, beverage and supplies Outlining operating goals and managers’ performance responsibilities Measuring actual performance against anticipated performance

7. Operating Budgets

8. Operating budgets are based on forecasts Forecast: prediction of sales levels or costs over a period of time Methods of forecast rely on historical data, such as average sales per customer (total dollar sales / total number of customers) Operational Records Sales History: number of portions of every item sold on a menu Production sheet: lists all menu items that are going to be prepared for a given date POS (point of sales) systems can report Moving Average Technique: (smoothing technique) several periods averaged together

9. Forecasting Analyze sales history (rem. Mkt plan) Account for externalities Blizzard/heatwave Predict sales volume Adjust accordingly Predict sales mix Anticipate item sales

10. Profit and Loss Reports A P&L is a compilation of sales and cost information for a specific period of time Also called an income statement Shows whether an operation made or lost money over a specific period of time Can compare actual to goals Lists income first then expences Helps detect variances and/or problems and make adjustments

12. Cost Control Tools POS- point of sales Full line supplier- offers complicated programs When choosing technology, will it Enhance guest satisfaction? Help increase revenue? Help reduce cost? Increase employee or management productivity? Improve communication?