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Food And Beverage Management, Study Guides, Projects, Research of English Language

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SIHM INDORE
VI SEMESTER
FOOD & BEVERAGE MANAGEMENT
1. COST DYNAMICS
a.
A. Elements of Cost
b.
B. Classification of Cost
2. SALES CONCEPTS
a.
A. Various Sales Concept
b.
B. Uses of Sales Concept
3. INVENTORY CONTROL
a.
A. Importance
b.
B. Objective
c.
C. Method
d.
D. Levels and Technique
e.
E. Perpetual Inventory
f.
F. Monthly Inventory
g.
G. Pricing of Commodities
h.
H. Comparison of Physical and Perpetual Inventory
4. BEVERAGE CONTROL
a.
A. Purchasing
b.
B. Receiving
c.
C. Storing
d.
D. Issuing
e.
E. Production Control
f.
F. Standard Recipe
g.
G. Standard Portion Size
h.
H. Bar Frauds
i.
I. Books maintained
j.
J. Beverage Control
5. SALES CONTROL
a.
A. Procedure of Cash Control
b.
B. Machine System
c.
C. ECR
d.
D. NCR
e.
E. Preset Machines
f.
F. POS
g.
G. Reports
h.
H. Thefts
i.
I. Cash Handling
6. BUDGETARY CONTROL
a.
A. Define Budget
b.
B. Define Budgetary Control
c.
C. Objectives
d.
D. Frame Work
e.
E. Key Factors
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VI SEMESTER

FOOD & BEVERAGE MANAGEMENT

1. COST DYNAMICS

a. A. Elements of Cost b. B. Classification of Cost

2. SALES CONCEPTS

a. A. Various Sales Concept b. B. Uses of Sales Concept

3. INVENTORY CONTROL

a. A. Importance b. B. Objective c. C. Method d. D. Levels and Technique e. E. Perpetual Inventory f. F. Monthly Inventory g. G. Pricing of Commodities h. H. Comparison of Physical and Perpetual Inventory

4. BEVERAGE CONTROL

a. A. Purchasing b. B. Receiving c. C. Storing d. D. Issuing e. E. Production Control f. F. Standard Recipe g. G. Standard Portion Size h. H. Bar Frauds i. I. Books maintained j. J. Beverage Control

5. SALES CONTROL

a. A. Procedure of Cash Control b. B. Machine System c. C. ECR d. D. NCR e. E. Preset Machines f. F. POS g. G. Reports h. H. Thefts i. I. Cash Handling

6. BUDGETARY CONTROL

a. A. Define Budget b. B. Define Budgetary Control c. C. Objectives d. D. Frame Work e. E. Key Factors

f. F. Types of Budget g. G. Budgetary Control

7. VARIANCE ANALYSIS

a. A. Standard Cost b. B. Standard Costing c. C. Cost Variances d. D. Material Variances e. E. Labour Variances f. F. Overhead Variance g. G. Fixed Overhead Variance h. H. Sales Variance i. I. Profit Variance

8. BREAKEVEN ANALYSIS

a. A. Breakeven Chart b. B. P V Ratio c. C. Contribution d. D. Marginal Cost e. E. Graphs

9. MENU MERCHANDISING

a. A. Menu Control b. B. Menu Structure c. C. Planning d. D. Pricing of Menus e. E. Types of Menus f. F. Menu as Marketing Tool g. G. Layout h. H. Constraints of Menu Planning

10. MENU ENGINEERING

a. A. Definition and Objectives b. B. Methods c. C. Advantages

11. MIS

a. A. Reports b. B. Calculation of actual cost c. C. Daily Food Cost d. D. Monthly Food Cost e. E. Statistical Revenue Reports f. F. Cumulative and non-cumulative

Activity: Classify each of the following as direct or indirect cost ( D or I) and as Fixed or variable cost (F or V). You will have two answers , D or I and F or V, for each of the following statements: closing stock of beverages. Whilst in the case of food cost we have to deduct the cost of staff meals, in the case of beverage cost, deduction from the cost of beverages consumed would have to be made in respect of authorized official entertaining and any transfers of beverages to other departments, e.g. the kitchen. Labor costs for conversion of materials into finished goods, human efforts are required such human effort is called labor. It includes all the remuneration of the employees, both in the form of cash and kind. Thus, in addition to wages, salaries, bonuses, commissions and similar cash payments, labor costs include staff meals, staff accommodation and similar non-cash benefits. Labor can be direct as well as indirect. For example in preparation of Tandoori chicken: salary and wages of kitchen staff will be direct labor cost while salaries of purchase manager, store keeper will be indirect labor cost. Overhead costs or expenses include indirect material, indirect labor and indirect expenses. Thus all indirect expenses are overheads. These are also of two types: direct and indirect, overhead costs are all costs other than materials and labor costs. Direct overhead expenses or cost may include operating and maintenance cost of machine while rent, rates, taxes, insurance, will come under the indirect overhead costs.

Classification of Costs:

By Nature By Behavior Material costs Fixed costs Labor costs Semi-fixed costs Overhead costs Variable costs Fixed costs: These are costs which remain fixed irrespective of the volume of sales, for example, rent, rates, insurance, depreciation, and managerial and supervisory salaries. Semi-fixed costs: These are costs which move in sympathy with, but not in direct proportion to the volume of sales. For example, fuel costs, electricity, telephone, laundry. Variable costs: These are costs which vary in direct proportion to the sales/output of the establishment. They increase or decrease in the same proportions in which the output increase or decreases. For example, cost of food, beverages and cigarettes and tobaccos.

Statement D/ I F/ V Fuel for preparation of Tea Raw material used in food preparation for staff cafeteria Expenses incurred in training of Kitchen staff Salary of storekeeper Oil used in preparation of kadhai chicken Milk used for making of soup Labor compensation in the kitchen Basic Concepts of Profit Three main concepts of profit are normally used in catering establishments: gross profit, net profit, and after-wage profit. Gross profit Gross profit may be defined as the excess of sales over the materials. Gross profit is also referred to as kitchen profit or bar profit, depending on whether it is the gross profit on food operations or beverage operations. Gross profit = Total sales – Cost of materials Factors affecting gross or kitchen profit and remedial measures: Causes Remedial measures Purchasing  Poor or incorrect specifications  Poor and verbal ordering  Inefficiency of supplier  Poor menu planning and yield analysis  Improper control on receiving  Re-check specifications  Change to more suitable supplier  Monitoring of prices from all reliable sources  Regular conducting of yield tests  Plan menus according to availability of raw material or season  Written order and must be placed by authorized person. Receiving  Short receipts on delivery  No one is authorized to received  Unskilled, untrained and inexperienced staff  Dishonesty  Credit notes not received  Establishing the standard operating procedures  Spot and security checks on time of receiving  Comparing weekly issuing sheet with requisition sheet  Questioning to staff about their adequate knowledge  Documentation of short supplies and ensure specification of the commodities Storage  Poor labeling  Poor hygiene of storage facilities  Poor maintenance  Establishing the standard operating procedures for storing.  Monitoring of stock levels and equipments  Questioning to staff about their adequate knowledge

Analytical problem The following information is based on a 100 covers specialty restaurant: Facts file: Name of the restaurant: Trinca Location: Gomti Nagar, Lucknow B. Uses of Sales Concept Sales concepts Sales: The term sale is defined as revenue resulting from the exchange of products and services and value. In our industry Food & Beverage sales are exchange of the products and services of a restaurant, bar or related for value. Ways of Expressing Sales There are two basic groups of terms normally used in F&B operations to express sales concept:

  1. Monetary Terms
  2. Non-Monetary Terms Monetary Terms  Total volume of sales expressed in Rupee terms.  Total sales by category expressed in rupee terms, e.g. Food Sales, Beverage Sales.  Total sales per cover.  Total sales per server.  Total sales per meal period.  Sales Price.  Average sale. Non-Monetary Terms  Total numbers sold, e.g. soups, steaks, and cocktails.  Total covers.  Covers-per hour, per day, per server.  Seat turnover.  Sales Mix.

Unit - 3 - INVENTORY CONTROL A. Importance Operating Hours: Lunch service: 1130 to 1530 Hrs and Dinner: 1930 t0 2330 Hrs Restaurant operates 350 days in a year. Average seats occupied: Lunch: 50 and Dinner: 175 Sales contribution: Food: 40% and Beverage 60% Average check: Lunch: Rs.650.00 and Dinner: Rs.900. Costs: food cost 35%, beverage cost 35% , labor cost 15% and overhead cost 25% Using the information, calculate all of the following: Annual Food Revenue, Annual Beverage Revenue, Annual Lunch Revenue, Annual Dinner Revenue, Total Annual Revenue, Seat Turn Over during lunch and dinner, total annual labor cost, total annual overhead cost, The average daily percentage seat occupancy during the year, Annual food Gross profit, Annual Beverage Gross profit, Annual total gross profit, Annual net margin, Annual net profit, Breakeven sales in covers and in rupees.

There are two methods to control the inventory of stores:

  1. Physical inventory system
  2. Perpetual inventory system
  3. Physical inventory system: A physical inventory system is a periodic actual counting of all the products in the storage areas. Usually store items are counted once in a month and usually the physical counting is done either before the normal opening timings of stores or after the normal closing hours as otherwise it may disturb the normal issuing schedules to various departments. In large organizations, a complete inventory may not be taken at one time. Instead, inventories can be taken in parts on weekly basis. The inventory process should involve at least two people out of which one is from control department and is not directly involved with the store room operations. And the other should be from the accounts department. One person counts the food which is arranged systematically in the store room. The stores items are either stored in the form of groups; like all pulses are stored at one place and all bottled and canned items are stored at one place; or they are stored alphabetically. Usually the items which are issued more frequently are stored near the delivery window and others can be stored at different place. The other person records the data on a physical inventory from which is designed according to the physical arrangement of foods on shelves. This helps in taking the physical inventory of all the items in the shortest possible time. The expensive items should be physically counted / weighed more frequently. PHYSICAL INVENTORY FORM Date ………………………… s. no Quantity on hand Unit size Food item Description Unit cost Total inventory value Taken by ……………….. carry forward inventory………………………………………
  1. Perpetual Inventory: The process of maintaining a continuous record of all purchases and items being issued is called perpetual inventory system. This process provides a continuous record of goods available at hand at any given time as well as the value of supplies at hand. Generally a perpetual record is used to restrict the products in dry stores and frozen stores. Perpetual inventory requires a considerable amount of labour to maintain and is maintained only for selected items, usually, very expensive ones. A perpetual inventory record is not sufficient for accurate accounting and control of food and supplies. Therefore, it becomes necessary that a perpetual inventory is tallies with the physical inventory. Item………………….

PERPETUAL INVENTORY FORM

( For store room) Store room………………………… unit……………………………… Date Order no. Quantity in Quantity out Quantity in hand PERPETUAL INVENTORY FORM ( For bar ) Item Date B/F Quantity in Quantity out Balance C/F Remarks Taken by………………….

level = Reordering level + Reordering quantity —(Minimum Consumption x Minimum re-ordering period) (c) Minimum Level: It represents the lowest quantity of a particular material below which stock should not be allowed to fall. This level must be maintained at every time so that production is not held up due to shortage of any material. It is that level of inventories of which a fresh order must be placed to replenish the stock. This level is usually determined through the following formula: Minimum Level = Re-ordering level — (Normal rate of consumption x Normal delivery period) (d) Average Stock Level: Average stock level is determined by averaging the minimum and maximum level of stock. The formula for determination of the level is as follows: Average level =1/2 (Minimum stock level + Maximum stock level) This may also be expressed by minimum level + 1/2 of Re-ordering Quantity. (e) Danger Level: Danger level is that level below which the stock should under no circumstances be allowed to fall. Danger level is slightly below the minimum level and therefore the purchases manager should make special efforts to acquire required materials and stores. This level can be calculated with the help of following formula: Danger Level =Average rate of consumption x Emergency supply time. (f) Economic Order Quantity (E.O.Q.): One of the most important problems faced by the purchasing department is how much to order at a time. Purchasing in large quantities involve lesser purchasing cost. But cost of carrying them tends to be higher. Likewise if purchases are made in smaller quantities, holding costs are lower while purchasing costs tend to be higher. Hence, the most economic buying quantity or the optimum quantity should be determined by the purchase department by considering the factors such as cost of ordering, holding or carrying.

This can be calculated by the following formula: Q = √2AS/I where Q stands for quantity per order ; A stands for annual requirements of an item in terms of rupees; S stands for cost of placement of an order in rupees; and I stand for inventory carrying cost per unit per year in rupees.

2. Preparation of Inventory Budgets: Organisations having huge material requirement normally prepare purchase budgets. The purchase budget should be prepared well in advance. The budget for production and consumable material and for capital and maintenance material should be separately prepared. Sales budget generally provide the basis for preparation of production plans. Therefore, the first step in the preparation of a purchase budget is the establishment of sales budget. As per the production plan, material schedule is prepared depending upon the amount and return contained in the plan. To determine the net quantities to be procured, necessary adjustments for the stock already held is to be made. They are valued as standard rate or current market. In this way, material procurement budget is prepared. The budget so prepared should be communicated to all departments concerned so that the actual purchase commitments can be regulated as per budgets. At periodical intervals actuals are compared with the budgeted figures and reported to management which provide a suitable basis for controlling the purchase of materials, 3. Maintaining Perpetual Inventory System: This is another technique to exercise control over inventory. It is also known as automatic inventory system. The basic objective of this system is to make available details about the quantity and value of stock of each item at all times. Thus, this system provides a rigid control over stock of materials as physical stock can be regularly verified with the stock records kept in the stores and the cost office.

(a) Slow moving Inventories: These inventories have a very low turnover ratio. Management should take all possible steps to keep such inventories at the lowest levels. (b) Dormant Inventories: These inventories have no demand. The finance manager has to take a decision whether such inventories should be retained or scrapped based upon the current market price, conditions etc. (c) Obsolete Inventories: These inventories are no longer in demand due to their becoming out of demand. Such inventories should be immediately scrapped. (d) Fast moving inventories: These inventories are in hot demand. Proper and special care should be taken in respect of these inventories so that the manufacturing process does not suffer due to shortage of such inventories.

6. ABC analysis: In order to exercise effective control over materials, A.B.C. (Always Better Control) method is of immense use. Under this method materials are classified into three categories in accordance with their respective values. Group ‘A’ constitutes costly items which may be only 10 to 20% of the total items but account for about 50% of the total value of the stores. A greater degree of control is exercised to preserve these items. Group ‘B’ consists of items which constitutes 20 to 30% of the store items and represent about 30% of the total value of stores. A reasonable degree of care may be taken in order to control these items. In the last category i.e. group ‘Q’ about 70 to 80% of the items is covered costing about 20% of the total value. This can be referred to as residuary category. A routine type of care may be taken in the case of third category. This method is also known as ‘stock control according to value method’, ‘selective value approach’ and ‘proportional parts value approach’. If this method is applied with care, it ensures considerable reduction in the storage expenses and it is also greatly helpful in preserving costly items.

Perpetual Inventory:

Perpetual inventory means the system of records, whereas continuous stocktaking means the physical checking of those records with actual stocks. The perpetual inventory method has the following advantages:  The stocktaking task, which is long and costly, is avoided under this method.  The management may be informed daily of the number of units and the value of each kind of material at hand.  The investment in materials and supplies may be kept at the lowest point in conformity with operating requirements.  A system of internal check is always in operation. This results in detailed and reliable checks on the stores.  It is not necessary to stop production so as to carry out a complete physical stocktaking.  Perpetual inventory records provide details about the cost of material for individual products, jobs processes, production orders or departments. Perpetual Inventory Card Item Code : Item Name: Unit Size : Unit Cost : Par Stock : Reorder Point : Date Order # Received Issued Balance

Valuation of receipts, Valuation of issues and Valuation of returns from production department to stores department. Valuation of receipts: Valuation of receipts is a relatively easy task, as the invoice or bill received from the supplier of the material is available as a starting point. Following propositions should be considered for this purpose. a. The price is billed by supplier will be the valuation of the receipts. The trade discount is deducted from the basic price and all other amounts as billed by supplier are added e.g. excise duty, sales tax, octroi duty, transport/ insurance charges etc. there are different opinions in respect of the treatment of cash discount. One opinion says that cash discount should be ignored, being purely of a financial nature, while valuing of receipts, while other opinion says that should be considered while valuing the receipt of the material. b. In some cases, more than one item of material is included in one single bill and some costs are jointly incurred for all the items of material. Such joint costs may be distributed on the basis of the basic price of the material. c. In case of imported material, the cost of material consists of a basic price ( which may be stated in foreign currency and should be converted in Indian rupees), customs duty, clearing charges, transport charges, octroi duty etc. in some cases, the point of receipt of imported material and the making of payment of the invoice amount may be different. As such, the rate of foreign currency may be different at the time of payment of the customs duty and at the time of payment of invoice amount. In such cases, the rate of exchange existing at the time of making the payment of invoice amount should be considered for valuing basic cost of material imported. Valuation of issues: This is a more complex process than the valuation of receipts. Because of this reason, the material may be issued out of various lots, which might have been purchased at various prices. As such, a problem may arise as to which of the receipt prices should be used to value the material requisition notes. Various methods may be used for this purpose, main methods of which are discussed as below. a) First In First Out ( FIFO): Under this method, the price of the earliest available lots is considered first and if that lot is exhausted, the price of the next available lot is considered. It should be remembered that the physical issue of material may not be made out of the said lots, though it is presumed that it is made out of these lots as stated above.

Merits of FIFO :  It is simple to operate.  It considers the valuation of closing stock at the current market prices.  It can be conveniently applied if transactions are not too many and the prices of the material are fairly steady. The objections raised against this method are as follows:  Calculations become complicated if the lots are received frequently and at varying prices.  Costs may be wrongly presented if the prices of different lots of material with different prices have been issued to batches of production.  In case of varying prices, the pricing of issues does not consider current market prices. b) Last in First Out ( LIFO) Under this method, the price of the latest available lots is considered first and if that lot is exhausted, the price of the lot prior to that is considered. Here also, It should be remembered that the physical issue of material may not be made out of the said lots, though it is presumed that it is made out of these lots as stated above. Merits of LIFO :  It is simple to operate.  The cost of materials issued considers fairly recent and current prices. The prices quoted on this cost fairly represent the real cost.  It can be conveniently applied if transactions are not too many and the prices of the material are fairly steady. The objections raised against this method are as follows:  Calculations become complicated if the lots are received frequently and at varying prices.  Costs may be wrongly presented if the prices of different lots of material are used for pricing issues to various batches of production.  In case of falling prices in the market, this method give wrong results. c) Average Price Method Both the above methods i.e. FIFO and LIFO, consider the exact or actual cost valuing the issue of material. However, these methods may prove to be disadvantageous if the transactions are too many and are at varying prices. In such