Food, Beverage and Labor Cost Process

The Control Process
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved
Important Control Definitions
 Control: Process used by managers to direct,
regulate and restrain the actions of people so
that the established goals of an enterprise may
be achieved
 Cost Control: Process used by managers to
regulate costs and guard against excessive
costs
 Standards:Rules or measures established for
making comparisons and judgments
 Standard cost: Cost of goods and services
identified, approved and accepted by
management
Important Control Definitions
 Standard procedures: Procedures that have
been established as the correct methods,
routines and techniques for day-to-day
operations
 Budget: Realistic expression of management’s
goals and objectives expressed in financial
terms
 Control system: Collection of interrelated and
interdependent control techniques and
procedures in use in a given food and beverage
operation
Cost/benefit ratio
The cost/benefit ratio is the relationship between the costs

incurred in instituting and maintaining a single control or
control system, and the benefits or savings derived by doing
so. Benefits must always exceed costs. Before instituting any
new procedures for control, management should first
determine that the anticipated savings will be greater than the
cost of the new procedures.
Control techniques available to a
manager include the following.
 - Establishing standards
 - Establishing procedures
 - Training
 - Setting examples
 - Observing and correcting employee actions
 - Requiring records and reports
 - Disciplining employees
 - Preparing and following budgets
The control process consists of four
steps.
1. Establish standards and standard procedures for operation.

2. Train all individuals to follow established standards and
standard procedures.
3. Monitor performance and compare actual performances
with established standards.

4. Take appropriate action
Copyrightto correct
© 2006 deviations
by John Wiley & Sons, Inc. All from
rights reserved

Additional Terms

 Control process
 Flexible budget
 Operating budget
 Procedures
 Quality standards
 Quantity standards
 Sales control
 Static budget
The Budget
The budget, or financial plan, will detail the
operational direction of your unit and your
expected financial results.
The budget should not be a static document.
It should be modified and fine-tuned as
managerial accounting presents data about
sales and costs that affect the direction of the
overall operation.
Just as the P&L tells you about your past
performance, the budget is developed to help you
achieve your future goals.
Budgeted Revenue - Budgeted Expense = Budgeted Profit
To prepare the budget and stay within it assures

you predetermined profit levels.
The effective foodservice operator builds his or
her budget, monitors it closely, modifies it when
necessary, and achieves the desired results.
Developing the Budget
 To establish any type of budget, you need to
have the following information available:
1. Prior period operating results
2. Examine the external environment to assess
any conditions that could affect sales volume in
the coming year
3. Review any planned changes in the operation
that would affect sales volume
4. Determine the nature and extent of changes in
cost levels
5. Have the projections for sales, costs and profits
approved by management
Monitoring the Budget
In general, the budget should be
monitored in each of the following three
areas:
1. Revenue
2. Expense
3. Profit
 As business conditions change, changes in the
budget are to be expected. This is because budgets
are based on a specific set of assumptions, and as
these assumptions change, so too does the budget
that follows from the assumptions.
 Budgeted profit must be realized if the operation
is to provide adequate returns for owner and
investor risk.
 The primary goal of management is to generate
the profits necessary for the successful continuation
of the business. Budgeting for these profits is a
fundamental step in the process.

Food, Beverage and Labor Cost Process

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Food, Beverage and Labor Cost Process

Uploaded by

Copyright:

Available Formats

The Control Process

The cost/benefit ratio is the relationship between the costs

1. Establish standards and standard procedures for operation.

with established standards.

To prepare the budget and stay within it assures

You might also like