HTM*2020nUnit 7
docx
keyboard_arrow_up
School
University of Guelph *
*We aren’t endorsed by this school
Course
2030
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
docx
Pages
6
Uploaded by bananamonkey88888888
Unit 7
Chapter 10 & 11
Lectures 13 & 14
Chapter 10: Monitoring Foodservice Operations III: Actual versus Standard Food Costs
• LEARNING OBJECTIVES • After reading this chapter, you should be able to: 10.1 Define standard cost and explain how it is calculated. 10.2 Calculate and compare actual and standard costs using the daily method. 10.3 Describe how to use a Menu Pre-Cost and Abstract form. 10.4 Define variance or potential savings and list several conditions that affect it. 10.5 Calculate and compare actual and standard costs using the periodic method.
• Achievable standards are those that are realistically within reach. Such standards take into account normal variances and inefficiency. • Ideal standards may never be reached. They represent what would result in a perfect situation (no spoiled goods, no worker errors, etc.). Many foodservice operations avoid ideal standards because they fear that employees will see ideal standards as meaningless since they cannot hope to achieve them.
Variances – compare standard and actual costs, and mathematical deviations between the two
Standard cost
-
Actual costs can be compared with standard costs, and any difference between them will be a useful measure of the extent to which the standards and standard procedures are being followed. This difference indicates both the degree of inefficiency in day-to-day operations and the |extent to which costs can be reduced w/o compromising or reducing standard
-
2 methods for comparing actual and standard costs
o
1
st
requires calculations of standard costs and actual costs for the day for all days thus far
in the operating period
o
2
nd
does not require daily calculations, relying instead on periodic determination of standard costs from records of actual portion sales in the period
-
If standard cost and selling price for standard portions are established and forecasts have been made, it is possible to determine in advance what food cost percent should be
-
At end of day or service when actual portions sales have been tallied to add to the sales history, this info can be used to determine what standard cost and cost percent those actual sales produce
Menu pre-cost and abstract
-
divided into two parts
o
the section on the left—the forecast section—is based on a sales forecast prepared sometime before a day or a meal. o
The section on the right—the abstract section—is completed later, after the day or service for which the forecast was prepared. -
All menu items including appetizers and desserts are included on the form
Standard cost and sales figures may be raised or lowered depending on which is desirable, by the following means
1. Sales prices may be changed. 2. Standard portion costs may be changed by altering portion standards— sizes, ingredients, recipes, or some combination of these. 3. Menu items may be added or eliminated. 4. The popularity index can otherwise be manipulated
Abstract
-
Right-handed portion of the form
-
Prepared after the sales have taken place
Actual cost percent
-
for any given day equals actual cost for that day divided by sales for that day.
-
Actual cost percent to date on any day equals actual cost to date for all the days thus far in the period, divided by sales to date for all the days thus far in the period
Standard cost percent
-
for any given day equals standard cost for that day divided by sales for that day. -
Standard cost per- cent to date on any day equals standard cost to date for all the days thus far in the period, divided by sales to date for all the days thus far in the period.
Potential savings -
The difference or variance btw actual cost and standard costs
-
May be recorded as dollars, as percentages of sales or as both
Periodic comparison
-
where daily calculations of standard costs and variance are impractical, it is often possible to adopt an alternative method that relies on peri- odic calculations for determining discrepancies
-
the periodic method presupposes that standards and standard procedures have been established for all phases of operations, that sales
histories are maintained, and that standard portion costs are known.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Chapter 11: Menu Engineering and Analysis
• LEARNING OBJECTIVES • After reading this chapter, you should be able to: 11.1 Complete a menu engineering worksheet and analyze the resulting information. 11.2 Define the terms star, dog, plowhorse, and puzzle as they relate to menu analysis. 11.3 Prepare a chart showing stars, dogs, plowhorses, and puzzles. 11.4 Describe appropriate action to respond to menu item modifications necessitated by menu engineering analysis.
Menu engineering
-
developed by Michael L. Kasavana and Donald I. Smith
menu mix percent
-
same as popularity index
-
divide number of units sold by the total number of units sold for all items
column F: Item CM
-
m is defined as sales price minus variable cost per unit
column G: Menu cost
-
number sold times individual cost
-
ex. 252 portions of tri-tip steak sold x $7.50 = $1890 menu cost
column H: Menu Revenues
-
number sold times sales price for the item
-
ex. 252 units sold x $23.65 = $5959.80 menu revenue
column L: Menu CM
-
multiply the number of units sold for each menu item by its contribution margin
-
ex. 252 units sold x $16.15 CM = $4069.80 menu CM
box O: Average Contribution Margin
-
determined by dividing the total in box M by the total number of units sold, found in box N
-
average CM = total CM/total # sold
box Q: Item Percentages
-
percentage of an entire menu represented by each item on that menu, multiplied by 70 percent
column P: CM category
-
The entries in this column, L for low and H for high, are made after comparing the
contribution margin for each menu item (Column F) with the average contribution margin for the
menu (Box O)
Column R: MM category
-
The entries in Column R (L and H for low and high) are determined by comparing the menu mix percentage for each item in Column C with the figure in Box Q.
o
H/H is a star.
A star is a menu item that produces both high contribution margin and high volume. These are the items that foodservice operators prefer to sell and maintain as menu items.
o
• L/L is a dog.
A dog is a menu item that produces a comparatively low contribution margin and accounts for relatively low volume. These are probably the least desirable items to have on a menu and should be considered for removal.
o
• L/H is a plowhorse.
A plowhorse is a menu item that produces a low contribution margin, but accounts for relatively high volume. These are items that have broad appeal to customers, but contribute comparatively little profit per unit sold. o
• H/L is a puzzle.
A puzzle is a menu item that produces a high contribution margin but accounts for comparatively low sales volume. Menu Analysis
Stars
-
Both profitable and popular and should normally be left alone
-
Sometimes possible to increase their menu price w/o affecting volume
o
Thus, increasing profitability
Plowhorses
-
Popular but relatively unprofitable
-
Should be kept on menu but attempts should be made in increase their contribution margins without decreasing volume
Puzzles
-
Comparatively profitable but relatively unpopular
-
Should be left on the menu but attempts should be made to increase popularity
Dogs
-
Both unprofitable and unpopular
-
Should be removed from the menu and replaced with something more profitable items
-
It is possible to better visualize the differences in the items by plotting them on a chart
o
The numbers sold are shown on the vertical line at the left of the chart, and the contribution margins are shown on the horizontal line at the bottom of the chart.
o
The horizontal line going across the chart at the 105 number, which is 70 percent of the average MM, represents 5.0 percent, the cut-off point that determines whether an item is classified as high or low for volume.
o
All items shown above the 5.0 percent line are classified as high, and all items shown below the 5.0 percent line are classified as low. o
The vertical line in the centre of the chart represents the cut-off point that determines whether an item is classified as high or low for contribution margin. o
All items shown to the left of the line are classified as low, and all items to the right of the line are classified as high. o
We have placed each item in its approximate position on the chart so that a visual picture of all items can be shown
Using 100 percent of the average for number sold
-
It is possible that many foodservice operators might want to use 100 percent of the average number sold instead of 70 percent for Box Q
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help