Q. EXPLAIN BRIEFLY ABOUT BREAK EVEN ANALYSIS WITH BREAK EVEN CHART.

Ans.
Break-even analysis is a technique widely used by production management and management accountants. It is based on
categorizing production costs between those which are "variable" (costs that change when the production output
changes) and those that are "fixed" (costs not directly related to the volume of production).
Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales
value or production at which the business makes neither a profit nor a loss (the "break-even point").
The Break-Even Chart
In its simplest form, the break-even chart is a graphical representation of costs at various levels of activity shown on the
same chart as the variation of income (or sales, revenue) with the same variation in activity. The point at which neither
profit nor loss is made is known as the "break-even point" and is represented on the chart below by the intersection of
the two lines:

In the diagram above, the line OA represents the variation of income at varying levels of production activity ("output").
OB represents the total fixed costs in the business. As output increases, variable costs are incurred, meaning that total
costs (fixed + variable) also increase. At low levels of output, Costs are greater than Income. At the point of intersection,
P, costs are exactly equal to income, and hence neither profit nor loss is made.
Fixed Costs
Fixed costs are those business costs that are not directly related to the level of production or output. In other words,
even if the business has a zero output or high output, the level of fixed costs will remain broadly the same.

Examples of fixed costs:

- Rent and rates
- Depreciation
- Research and development
- Marketing costs (non- revenue related)
- Administration costs
Variable Costs
Variable costs are those costs which vary directly with the level of output. They represent payment output-related
inputs such as raw materials, direct labour, fuel and revenue-related costs such as commission.
Semi-Variable Costs
Whilst the distinction between fixed and variable costs is a convenient way of categorising business costs, in reality
there are some costs which are fixed in nature but which increase when output reaches certain levels. These are largely
related to the overall "scale" and/or complexity of the business. For example, when a business has relatively low levels
of output or sales, it may not require costs associated with functions such as human resource management or a fullyresourced finance department.
Limitations of Break Even Analysis
Break-even analysis is only a supply side (i.e. . cost only) analysis, as it tells you nothing about what sales are actually
likely to be for the product at these various prices.
It assumes that fixed costs (FC) are constant.
It assumes average variable costs are constant per unit of output, at least in the range of likely quantities of sales. (i.e.
linearity).
It assumes that the quantity of goods produced is equal to the quantity of good sold ( i. e,. there is no change in the
quantity of goods held in inventory at the beginning of the period and the quantity of goods held in inventory at the end
of the period).
In multi-product companies, it assumes that the relative proportions of each product sold and produced are constant
(i.e. the sales mix is constant).
Q. WHAT IS BUDGET? EXPLAIN THE DIFFERENT TYPES OF BUDGET? ENLIST VARIOUS STEPS INVOLVED IN BUDGETORY
CONTROL WITH ITS ADVANTAGES.
OR
MENTION THE VARIOUS STEPS INVOLVED IN PREPARING A BUDGET
ANS.
Budget is a quantitative tool that helps businesses track and manage their resources.
Businesses use a variety of budgets to measure their spending and develop effective strategies for maximizing their
assets and revenues. The following types of budgets are commonly used by businesses:

[1]. Master Budget

A master budget is an aggregate of a company's individual budgets designed to present a complete picture of its
financial activity and health. The master budget combines factors like sales, operating expenses, assets, and income
streams to allow companies to establish goals and evaluate their overall performance, as well as that of individual cost
centers within the organization. Master budgets are often used in larger companies to keep all individual managers
aligned.
[2].Operating Budget
An operating budget is a forecast and analysis of projected income and expenses over the course of a specified time
period. To create an accurate picture, operating budgets must account for factors such as sales, production, labor costs,
materials costs, overhead, manufacturing costs, and administrative expenses. Operating budgets are generally created
on a weekly, monthly, or yearly basis. A manager might compare these reports month after month to see if a company is
overspending on supplies.
[3].Cash Flow Budget
A cash flow budget is a means of projecting how and when cash comes in and flows out of a business within a specified
time period. It can be useful in helping a company determine whether it's managing its cash wisely. Cash flow budgets
consider factors such as accounts payable and accounts receivable to assess whether a company has ample cash on
hand to continue operating, the extent to which it is using its cash productively, and its likelihood of generating cash in
the near future. A construction company, for example, might use its cash flow budget to determine whether it can start
a new building project before getting paid for the work it has in progress.
[4].Financial Budget
A financial budget presents a company's strategy for managing its assets, cash flow, income, and expenses. A financial
budget is used to establish a picture of a company's financial health and present a comprehensive overview of its
spending relative to revenues from core operations. A software company, for instance, might use its financial budget to
determine its value in the context of a public stock offering or merger.
[5].Static Budget
A static budget is a fixed budget that remains unaltered regardless of changes in factors such as sales volume or
revenue. A plumbing supply company, for example, might have a static budget in place each year for warehousing and
storage, regardless of how much inventory it moves in and out due to increased or decreased sales.
Steps for Budgetary Control
Important steps for successful implementation of a budgetary control system are:
1. To Fix The Budgetary Objectives:
Budgets are a means to certain ends. Therefore, the objectives to be attained during a particular period of time should
be described clearly and precisely before making budgets. Those who prepare and execute budgets must understand
fully the objectives and policies of the enterprise.

2. To Create Budgetary organization:

The proper organization is essential for the successful preparation, maintenance and administration of budgets. A
budgetary committee is formed which comprises the departmental heads of different departments. Departmental
managers are given the authority to prepare functional budgets. The chief executive is responsible for the co-ordination
of different budgets.
3. To identify Budget centers:
A budget centre is that part of the organization for which the budget is prepared. A budget centre may be department,
section of a department, or any other part of the department. The establishment of budget centre is necessary covering
all parts of the organization. The budget centers are also necessary for cost control purposes.
4. To prepare the Budget manual:
A budget manual is a document which spells out the duties and also the responsibilities of the various executives
concerned with the budgets. It specifies the relation among the various functionaries. It lays down the budgetary
procedures, organizational structure, fixation of responsibilities and budget time table.
5. To appoint the Budget controller:
A special officer is appointed for the administration of budgets. He gives useful advice and helps in the construction,
implementation, coordination and revision of business budgets. He also provides timely warning of variations from the
budgeted performance.
6. To Form the Budget committee:
A budget committee consisting of different executives is formed to assist the budget controller. The chief executive acts
as the chairman of the budget committee. The budget committee approves the functional budgets or sends them for
revision to the department heads. The budget committee facilitates in securing participation of personnel in the
preparation and administration of budgets.
7. To fix the Budget period:
A budget period is the length of time for which the budget is prepared and employed. The period or duration should be
determined according to the circumstances of the organization. The budget period should correspond with the natural
cycle of business. The nature of business and the control factor influence the budget period.
Q. Write down the four basic concepts in food & beverage production control.
ANS.
The four basic concepts in food & beverage production control are as follows:

Establishing standards and Standard procedures.

Standard Portion Size (SPS)
Standard Recipes.
Calculating standard portion costs.

[1].Establishing standards and Standard procedures

To establish the standards & standard procedures the following concepts are required :
1. Ingredients.
2. Proportions of ingredients.
3. Production method.
4. Quantity.
To reach this goal, it is necessary to develop the following standards and standard procedures for each menu item:
1. Standard portion size
2. Standard recipe
3. Standard portion cost
[2].Standard Portion Size (SPS)
Standard portion size is defined as the quantity of any item that is to be served each time that item is ordered.
Standard Portion Size (SPS) is expressed in the following forms:
1. Weight.
2. Volume.
3. Count
Advantages of SPS
Help to reduce customer discontent.
Help to eliminate animosity between the kitchen and dining room personnel.
Help to eliminate excessive costs.
Keeps a balance in Inventory consumption values.
Makes it easy to price the item.
[3].Standard Recipes
A recipe is a list of ingredients and the quantities of those ingredients needed to produce a particular item along with a
procedure or method to follow:
A Standard Recipe

is the recipe that has been designated the correct one to use in a given establishment.
It means that a recipe which has been tried out, sampled, written down, photographed; if necessary and made
good for a particular situation.
A standard recipe of an establishment need not be good for the other.

[4].Calculating Standard Portion Cost

Standard Portion cost is a Calculated or Planned cost per portion in monetary terms
Standard portion cost is defined as the dollar amount that a standard portion should cost, given the standards
and standard procedures
for its production.

There are several methods for calculating standard portion costs:

1. Formula
2. Recipe detail and cost card
3. Butcher test
4. Cooking loss test
1. Formula

Purchase price per unit

Standard portion cost = ----------------------------#of portions per unit

Recipe Detail and Cost Card

The purpose of a recipe details cost card is to determine the standard cost of one portion by using a form called recipe
detail and cost card.
End results of a standard Recipe are given below:
Gives Standardized yield.
Gives cost per portion.
Gives purchaser a clear image how much to buy.
In an excel spreadsheet one need not change quantities only changes price per.
Butchers Test
The purpose of the Butchers Test is as follows:
The purpose of a butchers yield test is to find the accurate costs of fabricated meats, fish and poultry.
This is done to determine the amount of usable meat and trim from a particular fabrication and to calculate the
value of all edible cuts.
The purpose of a butchers yield test is to find the accurate costs of fabricated meats, fish and poultry.
This is done to determine the amount of usable meat and trim from a particular fabrication and to calculate the
value of all edible cuts.

Features of Yield management

Used to determine the usable weight for an ingredient in the recipe for making the final edible product.
Yield percent is commonly used in the kitchen to assist culinary professionals in determining amounts to order,
recipe cost and the number of servings.
Yield percent plays a vital role in maintaining consistency in the kitchen thus reducing wastage.

Q. WHAT IS F & B CONTROL? WHY IS IT NECESSARY FOR HOTEL INDUSTRY? OUTLINE THE FEATURES OF A GOOD F & B
CONTROL SYSTEM?
ANS.
Definition
A food and beverage control system is a means of implementing best practice within a restaurant or catering operation.
It gives managers a better idea of the flow of food through the restaurant, enabling them to plan cash flow and stock
control more effectively. At the sharp end, it provides chefs with a more structured way of planning menus, taking into
account nutritional and financial considerations.
Necessities of F & B Control in Hotel Industry
In areas like manufacturing, companies keep close tabs on the manufacturing cost and value of their products. And yet
in dining establishments, the core product -- the food -- is often not subject to the same scrutiny.
Restaurant budgets are often based on what was achieved last year, Tough says. Ideally, chefs should be able to cost out
each item on a menu, creating a clear picture of the cost of each sale to measure against its revenue. This helps you to
understand which are the most profitable items, and whether you are keeping food wastage low enough to hit the
profitability targets that you have set yourself.
Putting in place a proper food and beverage control system will help you to make more intelligent decisions that help to
cut the overall cost of sale for an establishment while maintaining profits. For example, if you find that your overheads
are too high, you may be able to cut items from the menu that have a higher cost-to-revenue ratio.
Features of F & B Control System:
There are several key features that establishments should consider when implementing a food and beverage control
system. You may find that these features fall under different products or modules within a single companys offering:
Market lists
One common mistake made by restaurants is to purchase ingredients from suppliers without any clear rules.
Creating a database of suppliers and ingredients will enable you to manage ingredient pricing more effectively.

Nutrition
More applicable for specialist dining establishments (such as those in hospitals) or catering companies, the
ability to provide nutritional information on the food you serve can offer you a competitive edge, and reassure

customers particularly in areas such as school dinners, for example.

Recipe management
According to Max Mueller, head of the European team at food and beverage control system company
Hospitality Control Systems and a chef for eleven years, many chefs either work from memory without any clear
recipe, or have incomplete recipes that they do not follow.
Codifying recipes helps you to manage your ingredients more effectively, while building in standard estimates
for wastage (such as the yield after peeling and chopping vegetables, or the wastage caused by evaporation and
transfer of a cream sauce from bowl to bowl). This will help you to price your food more accurately. If you know
exactly what a meal costs to make, you can price it more accurately to undercut the competition while still
making a quantifiable profit.
When looking at recipe management, consider the ability to nest recipes, because most recipes are made up of
multiple others. And a function to scale recipes easily for different quantities will be invaluable for busy chefs.

Stock control and purchasing

Some food and beverage control systems give you the chance to inventory your food and create purchase
orders for more so you can maintain a minimum level of perishable stock and free up your capital. Such systems
can also be used to create work lists, so that staff taking delivery of orders know exactly what to expect on any
given day.
Reporting
Reporting is a key asset in any food control system software. In addition to providing preconfigured reports, the
best systems will let you customise reports to suit your own particular requirements. Reporting can be used to
analyse a vendor's history, or to find out how volatile an ingredients price has been over the past few months.
Other good uses for reporting modules include finding your best-performance, highest margin menu items, and
using "what if" analyses to assess the impact of a cost change to a particular menu item.
Intelligent reporting can help you to forecast your requirements, which can be useful for seasonal items, for
example, or for ingredients with volatile pricing. Baselining your usage of butter over the course of a year might
show that you use more butter in the autumn -- this can be a useful piece of market intelligence if you see that
butter prices have been steadily increasing for the past few weeks.
Q. DEFINE F & B MANAGEMENT. OUTLINE THE RESPONSIBILITIES OF A F & B MANAGER. OUTLINE THE LIMITATIONS
OR CONSTRAINTS ON FOOD BEVERAGE MANAGEMENT. EXPLAIN THE FACTORS AFFECTING F & B MANAGEMENT
ANS.
Definition
The Food & Beverage Management encompasses all aspects of the industry concerned with the supply and service of
food and drink, alcoholic or not. It includes not only the revenue producing areas of the restaurants and bars, lounge
and room service, hut also the support services like wash-up, still room, kitchens, cellars and stores. All in a wide range
of sectors in both market and cost oriented operations. In the hotel sector, food and beverage revenues account for

about 40% of total sales. Clearly, a major contributor to sales and profitability. Food & Beverage must be regarded as the
most complex of the catering functions.
Responsibilities of The Food & Beverage Manager

The provision of food & beverage facilities catering for a clearly defined market.
The 'System' of provision, i.e. purchasing (including receiving and issue), storage, preparation, service, of food
and drink. Total customer satisfaction, The formulation, establishment and maintenance of an efficient control
system, with the purpose of: Monitoring costs and prices maintaining quality and competitive rates and keeping
within budget requirements.
Providing management information to allow planning, budgeting, etc.
Reconciling act ital and expected performance and taking measures to establish causes and rectify
discrepancies.
The training, motivating and controlling of all Food & Beverage staff. Co-ordination with other sections of the
operation.

Limitations or Constraints on Food Beverage Management

A number of characteristics or 'constraints' provide the framework For Food and Beverage operations contributing to
the complexity of the job. They can be divided into INTERNAL and EXTERNAL factors:
External Factors: Political - Legislation, taxation, licensing law, local regulations, planning law, etc. Economic - Rising
costs, instability, changes in disposable income, credit facilities, interest rates on capital expenditure, etc - Ecological Recycling, Conservation, Energy reduction, Environmental - Built environment, workplace planning, lighting, heating,
design, etc. Social, Demographics, population distribution, socio-economic groupings, ethnic influence, fads and
fashions, etc. Technical - Technological innovation interrupting the system, influence of ICT, new product development,
etc.
Internal Factors: Commodities -Transferability, perishability, loss/wastage potential, pilferage, etc. Staff - shortages and
surpluses, lack of expertise/skill, transient, use of casual and part time, often poor supervision, etc. Control - Cash
transactions, fluctuation in costs, transferability, thieve-ability, generally high frequency: of low spend transactions, etc.
The function of Food and Beverage managers is to 'manage' the constraints and not just to 'react' to them, isolating and
dealing with causes and not just dealing with symptoms.
Factors Affecting F & B Management
Financial Policy: Determines the level of profitability, cost limits, contribution to total profit by each revenue generating
area. This involves the setting of targets figures for each operating unit and the business as a whole. For example, the
'financial polices for an industrial contract caterer would set the targets for the operation overall, the level of subsidy,
the management fee and cost limits per employee or meal.
Marketing Policy identifies the broad market and 'publics' the operation is ended to serve, present and future customer
requirements, the 'Corporate National Identity', customer profiles, market share, sales volume and profitability
expectations, average spend, product range, customer satisfaction measures, pricing, etc.
The Catering Policy: is normally evolved from financial and marketing policies. It will includes operational characteristics
like: type of customer, type of menu, beverage provision, standards of quality, yield and cost, the 'system methods of

purchasing and purchasing specification, type, level and style of service, comfort and interior design, hours of operation,
Hygiene and Health & Safety procedures, control procedures.
Personnel Policy: Provides guidelines on the recruitment, selection, training, induction, organization, supervision,
progression and succession, retirement. As well as standard policy on legal requirements, contracts, conditions of work,
wage structure, procedures for grievance and discipline, etc, all of which affect the operation of the F&F function