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Cha7 Costing
 

Cha7 Costing

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Costing

Costing

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    Cha7 Costing Cha7 Costing Presentation Transcript

    • Chapter 7 Standard Product Costs & Pricing Strategies Food and Beverage Operations Tuesday, May 19, 2009 1
    • Chapter Overview • Standard recipes • Standard food & beverage costs • Menu pricing methods Tuesday, May 19, 2009 2 Essential knowledge for Food Service Professionals The time to begin considering this information is during college.
    • Standard Recipes • A standard recipe: a formula for producing a food or beverage item – Ingredients – Quality of each ingredient – Preparation procedures – Portion size – Portioning equipment – Garnish Tuesday, May 19, 2009 3 The standardized recipe is commonplace in large hotels, restaurants and chain restaurants
    • Advantages of Standard Recipes • Consistency of quality, flavor, portion size • Efficient purchasing practices • Preparation of correct number of items • Effective scheduling • Less supervision required • Elimination of guesswork • Less reliance on employee memory Tuesday, May 19, 2009 4 Strict standards in the kitchen begin with accuracy, consistency and portion control
    • Steps for Standardizing Recipes Chaining Recipes – Including sub-recipes as ingredients for a standard recipe. 1. Select time period for development 2. Have the chef or bartender describe preparation 3. Double-check recipe by observation 4. Record the recipe 5. Share the recoded standard recipe with staff 6. Test for quality and quantity (Exhibit 6 p.162) 7. Train employees in standard recipe use Tuesday, May 19, 2009 5
    • Adjustment Factor • To accurately increase or decrease the yield of a standard recipe • Divide the desired yield by the original yield Desired Portions (225) Adjustment = (2.25) Factor = Original Portions (100) New Amount 8 oz 2.25 X =18 oz = (original (adjustment amount) factor) Tuesday, May 19, 2009 6
    • Cost Calculations • Portion Cost: Divide the total cost of the item by the number of portions the recipe yields. Total Cost ($75) Portion Cost = Portions (50) =($1.50) Tuesday, May 19, 2009 7 Food cost typically range from 24-35%
    • Cost Calculations (cont.) • Total Meal Cost: Add the portion costs of all meal components • Contribution Margin: Subtract food costs from food revenue Contribution Margin = Selling Price - Food Costs Tuesday, May 19, 2009 8
    • Standard Beverage Cost Tuesday, May 19, 2009 9 Usually 15-18%
    • Standard Beverage Cost (cont.) Cost per Ounce: divide the cost of the bottle by the number of ounces per bottle e.g. per-ounce cost $1 = $25/25oz Drink Cost Percentage: Divide drink cost by drink selling price and multiple by 100 Drink Cost Percentage= (Drink Cost / Drink Selling Price) X 100 e.g. Drink Cost Percentage 25%=($1/$4) X 100 Tuesday, May 19, 2009 10
    • Subjective Pricing Methods • Reasonable – Represent a value to guest • Highest – Guest will be willing to pay • Loss-leader – Draw in guests who will order more expensive items once they are on the premises • Intuitive – Will appeal to guests; trial-and-error Tuesday, May 19, 2009 11
    • Objective Pricing Methods (cont.) • Desired food cost percent markup Selling Price = item's standard food cost divided by desired food cost percent e.g. $1.5/33%= $4.55 Elasticity of demand – Relationship between selling price and volume sold – Demand responds to price changes Tuesday, May 19, 2009 12
    • Objective Pricing Methods (cont.) Is Lower Food Cost Percentage the Goal? Menu Food Menu Selling Food cost Contribution Item Cost Price Percent Margin Chicken $2.50 8.25 30.3 $5.75 Steak $5.50 14.00 39.3 $8.50 Tuesday, May 19, 2009 13 Although Pricing is crucial to make a profit Variety and guest satisfaction needs to be considered for repeat business.
    • Objective Pricing Methods (cont.) • Profit Pricing – Allowable food cost Forcasted Profit Food - Nonfood - Requirement = Allowable Food Expenses Costs Revenue s $800,000 - $415,000 - $75,000 = $310,000 Tuesday, May 19, 2009 14
    • Objective Pricing Methods (cont.) • Budget food cost percent: divide allowable food costs by forecasted food sales. Budgeted Food $310,000 (allowable food costs) Cost Percent = = .388 $800,000 (allowable food costs) (39% rounded) The resulting percentage is divided into an item's standard food cost to arrive at a selling price. e.g. $1.5 / .39 = $3.85 Tuesday, May 19, 2009 15