COST CONTROL

WHAT IS COST CONTROL ? WHY IT IS NEEDED? HOW TO DO IT?

Cost control is controlling unwanted expenditure & limiting wastage by

different procedures.
Cutting costs is the simplest way to improve your bottom line.
Introducing a cost control system can bring immediate savings and
ensure that you remain competitive in the longer term.
Identify your major cost centers. Typically these might be purchasing,
production, sales and marketing, financing, administration, premises,
facilities management, and research and development (R&D).
Identify the major types of cost within each cost centre.
These might include staff costs, raw materials and supplies, utility bills
for energy and water, capital expenditure etc.

HOW CONTROL SYSTEM IS TO BE MANAGED ?

1) Keep it Simple- cost control isn’t ‘rocket science’ so your system should not
be designed as if it were. Keep your procedures and forms to the
minimum necessary to do the job so that the people who provide
information and fill out the reports can do so easily. If the system is too
complicated there is always a chance that the staff will get confused and
that they will have excuses about the process being too time consuming or
difficult to complete.

A second element of “Keep it Simple” is to reduce the number of costs or

items any one person tracks to between seven (7) and ten (10) “statistics”
as research shows that this is the maximum number of statistics that any
one person can watch and manage. If there is a need to track a great
number of statistics – delegate that task. The General Manager may track
kitchen and dining room labor costs, while the dining room manager tracks
labor costs by shift and/or by position title.

2) Make the System Timely – information that takes too long to get, is
ineffective in controlling an operation. Long ago I discovered that finding
out on the 20th of the month that I had an unacceptable cost the previous
month probably meant that I was going to experience at least two months
of bad costs – the previous month which had already passed and the one
that was now almost over. I developed snapshot reports that tracked my
sales and costs on a daily and month-to-date basis so I would always
know where I was and could take action immediately if necessary.

3) The Information Must be Comparable - the whole purpose of accounting

and cost control systems is to provide the information that is necessary to
manage the operation and to track changes over time and progress
towards goals. In order to do this, the information provided must be
 comparable – if you change systems or procedures (such as what you
count or don’t count) you will get different information and might not be
able to compare different periods (i.e.: make useful year-to-year
comparisons).

4) Stay Current – operational profitability, which is dependent upon

controlling costs, is not a ‘destination’ that you reach at some point, it is a
‘journey’ that you will be on each and every day that your business is in
operation. To make sure that your costs are being controlled, someone
must actively monitor them each and every day and take action if there
are inappropriate or unacceptable deviations. If you expect it, inspect it!

5) Practice the Pareto Principle- which states that 80% of your attention
should be on the 20% of items that make a difference. You will to see the
best results in cost control when you monitor the higher cost and/or higher
volume items. The loss of one strip steak will probably have more impact
upon food cost than the loss of a case of dinner rolls – so track the steak
usage, not dinner rolls. Similarly, to correct or prevent labor cost problems
concentrate on the hours and overtime of your highest paid staff rather
than the lowest paid staff.

6) Get what you pay for – thirty plus years ago as a receiving clerk I was
told, “Our scale is our back door cash register.” We had a sign on the
receiving area wall that said:

If it’s purchased by weight, we weigh it.

If it’s purchased by count, we count it.

And we did as part of our receiving and inspection process. Initially there
were many discrepancies in weights and counts, but these quickly
ceased. It goes without saying that even small shortages can have major
impacts on costs whether those shortages are in products purchased or
labor hours.

7) Know what the Costs Should Be – if you don’t know this then you will
never know how well you’re doing and you will never know when to take
action. It’s a good idea to prepare a theoretical cost for use as a goal and
to compare performance to as well as knowing industry statistics for
similar operations.

8) Costs are Cumulative and Interactive – food, beverage, and labor costs
are all added together to become the “Prime Costs”. It is a false economy
to save on one cost if it adds greatly to another. Seek out “value added”
products the overall effect of which is to lower total operating costs.
WHY CONTROL SYSTEM IS REQUIRED ?

Three brief examples will illustrate the need for the principles listed above:

• A restaurant whose food cost was “too high” but

which did know know what its costs should be. The actual
food cost was only 0.3% above their theoretical cost – it was
the portion specifications that were wrong.
• A restaurant with “high costs” because menu
prices had not been adjusted to account for the increased
cost of dairy and meat products.
• A restaurant that wanted to lower its food cost to
become more salable found, when they purchased a scale,
that they were regularly being shorted by as much as 10% of
the weight listed on the invoices of a certain trusted meat
purveyor.
• A restaurant whose credit card discount rate was
nearly double that of comparable operations simply because
the owner didn’t know what the going rate was.

A properly designed cost control system is required because it provides

managers with concise, timely, accurate, actionable information in an easy-to-
understand format and will be well-worth the time and effort it takes to develop
and implement. Once the system becomes established as part of the operational
routine it will help enhance and sustain your profitability. It is probably the case
that an effective cost control system will have other non-monetary benefits
including reducing your stress level while increasing your level of self-
satisfaction.

Kirby D. Payne, CHA is President of Minneapolis based American Hospitality Management

Company, a growing hotel investment, management and consulting firm. Payne is also Secretary Elect of
the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-
Hotel Management Companies. Additional articles can be found on the internet at www.American-
Hospitality.com.

OBJECTIVES OF FOOD & BEVERAGE CONTROL DEPARTMENT

1) Analysis of income & expenditure :- The revenue analysis is usually by each

selling outlet ,of such aspects as the volume of f&b sales, sales mix , average
spending power of customers served. The analysis of f&b cost, portion cost ,
labors cost analyses the gross profit , net margin , net profit etc.
 2) Establishment & maintenance of standards :- I f standards are not set then no
employee would know in detail the standards to be achieved nor could the
employee’s performance be effectively measured by management. Efficient units
have standard operational procedures manual with all the staff & on job training
to upgrade it from time to time. Major operating standards as yields, portion sizes
& portion costs are controlled to have consistency in profitability & guest
satisfaction.

3) Pricing :- It is important to determine food menu & beverage list prices in the
light of accurate f&b costs & other main establishment costs ; as well as general
market considerations, such as the average customer spending power, the prices
charged by competitors & the prices that the market will accept.
4) Prevention of waste :- To achieve desired levels of performance it is necessary to
prevent wastage of materials caused by poor preparation, over production, failed
to use standard recipes etc. This can be managed by only a efficient f&b control
system.
5) Prevention of fraud :- It is necessary for control system to prevent or restrict
fraud by customers & staff. Typical fraud by customers are as walking out
without paying ,making payments by stolen cheques or credit cards etc & by staff
are overcharging or undercharging for items served & stealing of food ,drink or
cash.

FOOD COST :-- The cost of food incurred in preparing the meals served.

SEVEN STEPS IN FOOD COST CONTROL PROCEDURES

1. ORDERING - The first step is to order right. Having detailed recipes,

designing purchasing specifications, doing comparative shopping based on those
specifications, and comparing quality, price and service, etc. Oh yes, don't order
too early in order to avoid spoilage, wasted storage space and lost interest on your
money. Don't order too late, so premium costs and delivery charges accrue? Purchasing
from the wholesale markets is the best when you are purchasing in bulk. Otherwise if you
are doing it for a small establishment cash & carry methods is more suitable.

2. RECEIVING - The fundamentals are obvious: count; weigh; inspect for condition
and quality; verify against the purchase order; keep the receiving area clean and
uncluttered; limit access to the receiving area; train the person receiving and make him
or her responsible. Using of tags for expensive items helps in keeping an eye on it &
proper rotation of stock Get credit memos from the delivery driver & should be entered
on a daily basis in the goods received book.

3. STORING - Is the method and place of storage for the various items appropriate for
the item? Is it secure from pilferage? Are the shelves strong enough for the
product, allow air circulation and easy to clean? Are all items stored at a temperature
appropriate for that product? Are items dated (with year, in some cases) and priced?
Is the storage area orderly and clean? Should shelves be labeled and maybe even
stocking quantities noted as in bin card.

4. ISSUING - What is issuing based on? Who has access and or authority to issue or
take things from the secured store rooms and walk-ins? Are issues being made in
appropriate quantities and at appropriate times? Is there a relationship to volume or
reasonable par stocks? Are issues being accounted for? Is a perpetual inventory or sign
out sheet designed specifically for your operation or a particular store room in use?

5. PREPARATION - Things like triming properly; use trimmings for stock pots and
other recipes. Proper tools, sharp knives, clean and neat working area, enforcing a
policy of following standardized recipes, and having photos of finished products
available should be followed regularly.

6. COOKING - Various considerations here, as you know more than I. Proper

temperatures, proper cooking times, following recipes carefully, using photographs of
finished products, correct size, material, and type of utensils and cookware, clean work
area.

7. SERVING - Serving is not only about portion control, it is also about decisions
made regarding portion size and presentation. With a buffet, it is obvious. Proper
serving utensils, proper holding/serving equipment, right presentation order, plate sizes,
etc. In a bar its easy, too. Jiggers or other measuring and control devices and very
strict discipline. I take it back, the discipline isn't easy especially in tight labor
markets. Dining room service should be easy to control using good kitchen
supervisors, trained cooks, photographs for both cooks and servers, etc. Watch what
comes back from bused tables to see if portions are proper. Marketing decisions
may drive large portions but if the patrons are not eating it or taking it home, the
portion size or the recipe should be reconsidered. Proper china for each item served is
important for both presentation and portion control.

Work hard on your cost controls and be consistent about them. One element of
controlling food cost covers all seven categories: thorough training. Give your staff the
ability and knowledge and confidence to do their jobs properly and to your specifications.
Inconsistency and failure to enforce procedures will drive costs skyward. Failure here is
like throwing money away.

Receiving
 Aims, polices & standards

Receiving
Buying

Storing & Issuing

Preparing

Selling

Controlling & Reporting to management

Food & Beverage Control Cycle

CONTROL DEPARTMENT

Controller heads F&B Control department. He coordinates with chef & f&b manager for
food & beverage purpose also coordinates with purchase, receiving & stores.

Main job is to monitor & control the cost of food & beverage in continuous process &
helps the establishment to make necessary changes & adjustments in its procedure & at
times revise the price of its food & beverage prices for maintaining a profitable business
conditions.

Procedures of the f&b controls

• Cost procedures of f&b.

• Daily & monthly f&b reports
• Record of compensatory staff meals
• Costing of store, issues & banquet menus
• Checking of kot & other verification of periodical f&b stock & inventories
• Daily inventory of liquor
• Market survey & its reports
• Portion control & control of wastages
 PURCHASING

Purchasing is a function concerned with the search, selection, purchase, receive, storage,
and the final use of the commodity in accordance with the catering policy of the
establishment. The aim of the purchasing staff is not only purchasing but also responsible
for receiving, storage & issuing of the product and also should have knowledge about the
need & use of the product.

(Aims)Duties & Responsibilities Of Purchasing Manager

1) Managing the purchase office, receiving and the store.

2) Purchasing of all commodities.
3) Ensuring continuity of supply of all items to the concerned departments.
4) Selecting quality suppliers
5) Updating him self and the concerned departments with new products, services &
market trends.
6) Coordinating with production department to standardize commodities & therefore
reduce stock levels.
7) Liaising with F&B production, controls, accounts & marketing departments.

How to select a supplier & analyze their performance?

Source of supply :-- Source of the supplier list can be made by keeping the following
points in mind with a detailed market study (physically & databases ):-

1) Details of the firm or shop and the range of items they are selling.
2) Copies of their recent price lists.
3) Detail of the trading terms i.e mode of payments & supplies.
4) Details of other customers.
5) Sample of products.
6) A visit to the new firm or food store.
7) Hygiene standard of the supplier.

Evaluating a supplier:- The three main performance criteria which are normally used in
evaluating or selecting a supplier are:-

1) Price performance – The supplier who supplies the required quality of goods at
the lowest price is the best.
2) Quality performance - The supplier who supplies the buyer consistently with
goods of the desired quality as laid down in the purchase specification.
3) Delivery performance - The ability of the supplier to supply goods at the
specified time & date agreed with the buyer records his performance rating.
What are the types of food purchasing specification?

A food purchasing specification is a concise description of the quality, size & weight
required for a particular item. The standards are set by the management team like the
Head Chef ,F&B Manager, Purchase Manager etc. The copy of this set standard should
be there with the receiving clerk for proper check & acceptance of quality goods only.
The specifications would be as follows :-

• Definition of the item so that the supplier can understand the need of the buyer
specifically.
• Grade or brand name like tomato ketchup from Maggie or ‘A’ grade prawns etc.
• Weight, Size or Count like 2 dozen of Alphanso Mangoes each weighing 200gms
or 50 Kg Lamb Legs each weighing 2kg etc.
• Unit against which the prices should be quoted like per dozen or per Kg etc.
• Special notes for the commodity like Black Pomfret or Meat from the loin of veal
for Steaks or packaging orders like frozen Sole fish fillet of 1kg each etc.

While ordering for the required commodities following points should be

remembered:-

• Degree of perish ability of food.

• Rate of usage in the market.
• Prevailing prices & fluctuations occurring from time to time in the market.
• Quantity to be bought of each commodity at a time.
• Supplier & their terms of supply.

Define SPS, its need & objectives in detail.

SPS – Standard Purchase Specification – It is a concise description of the quality, size,

weight or count factors desired for a particular item. Specification buying will give
uniformity & consistency to purchasing & receiving that will aid to maintaining a desired
food cost & create a standard product.
The copies of SPS which is made in accordance with the catering policy of the
establishment should be with the purchase dept, F&B mgr, Chef & the receiving clerk to
check & maintain the standards.

SPS must contain the following : -

1) Definition of each item.

2) Grade or brand name of the items.
3) Weight, size or count of the items.
4) Units against which the prices should be quoted.
5) Special note for the commodity.
 Advantage or Objectives of purchase specification :--

• To establish a suitable buying standard for a particular commodity for the

hotel.
• To furnish the suppliers in written the specific terms & conditions
according to the requirement of the hotel.
• To help in setting the price of a commodity for a fixed period.
• To obtain a standard product or material for the concerned dept.
• Providing detailed information to receiving & store as to maintain the
standard of foods & beverages to accept as agreed.

What are the purchase procedures & the standard methods of purchase?

Purchase Procedures are :-

• Preparation of purchase requisition form

• Selection of the source of supply
• Entering into a contract with the supplier
• Acceptance of the goods ordered and settlement of any discrepancies to the said
specification during delivery
• Transfer of commodities to the ordering department or to stores or cellar.

Methods of purchasing :--

1. Contract purchasing / Competitive bid method :- There are two types of

contract purchasing namely:-
• Specific period contract – Determining the source of supply & the
price of goods for a stated period of time often three or six months.
This reduces the time & labour of ordering & negotiating to a
minimum and also helps in budgeting & pricing because the prices are
fixed for a period of time.
• Quantity contract – This ensures a continual supply of a given product
in a fixed quantity of an essential item at an agreed price over a
particular trading period.

A contract is a legal document & its conditions should be prepared by the

firms solicitors to avoid any dispute. It should contain all the general &
specific conditions required by the organization.

2. Purchasing by daily market list :- It is mainly used for purchasing perishable

foods on a daily basis & generally from two or more suppliers. The daily
 market list is prepared by the head chef in consultation with other chefs
keeping in mind the next days business & stocktaking of the perishable items.
In the purchasing office they segregate the items according to profitable
supplier then the order is placed after approval from the purchasing manager.

3. Purchasing by weekly / fortnightly quotation list :- This method is generally

used by small establishment having small storage place for purchasing of
groceries. The head storekeeper fill the stock in hand column in the master list
& the requirement column keeping in mind the reordering level of the items.
This list is then sent to different suppliers for quotations with product
specifications. On receiving the quotations, the best suppliers are selected and
the orders are placed.

4. Purchasing by cash & carry / Negotiated buying method :- This method is

practiced mainly in small establishment, where the requirement is in small
quantity & the wholesalers denies to supply. Materials are purchased from
warehouse like ‘Metro Cash & Carry’ according to the function of the day.
Here you have to pay cash everyday & the rate varies according to the market
trends.

5. Purchasing by paid reserve / Standing Order Method :- Daily delivery of

specific food items like dairy products or purchase of any special products
required for a particular day only by cash from the open market are called as
standing or flexible standing order.
Purchase Order Form S63639
Date:_______________________
Company Name Address & Telephone No
…………………………………
………………………………………………………………………………
To……………………………….
Supplier…………………………………………………………..
.

Please supply & invoice to the following…………………………………...

………………………………………………………………………………
------------------------------------------------------------------------------------------

If in doubt contact …………………………………..................................

……………………………………………………………………………

Please quote the number of this order on Delivery Note and Invoice
Quantity Description Cost

Invoice total less discounted plus taxes at

the current rate

Authorized Signature
 RECEIVING

Receiving is one of the most important department in maintaining the standards of any
catering establishment as this is the entry point of any purchased product. It is one of the
strongest link in the food control cycle. The receiving area should be well lit & on a
raised platform so that loading & unloading of goods can be done properly. Instruments
like weighing scale preferably electronic, colored plastic baskets for vegetables, fruits,
meat & milk products should be kept in front. Then trolleys are required for carrying the
items to the stores or to the kitchen. An office with a PC for maintaining the records &
staff to receive, check & transport the items to the stores.

What should be the aims & objectives of the receiving staff ?

Aims & Objectives of the receiving staff are:--

1) The quantity of goods received matches the SPS

2) The quantity of goods delivered should tally with the quantity ordered
3) The price stated in the delivery note is same as in the purchase order form
4) To raise a credit note for the goods which doesn’t comply the SPS & inform the
purchase manager, so that he can arrange an alternate option to avoid any shortage
in the production .
5) To make accurate record of the goods received in the goods received book.

Receiving staff should have the following qualities :-

• Honest & trustworthy

• Trained in clerical procedures
• Knowledge of quality inspection
• Knowledge of SPS of each product
• Strict in dealing the supplier

•
H
Explain the hygiene standards & requirement of equipments at the receiving area.
•

Hygiene & Sanitation Standards of the Receiving Area :-

1. Walls should be treated with pesticides to make them fly proof.

2. There should be guard against rodents & pests in that area.
3. The area should be neat & clean at all time.
 4. Thorough washing should be done at the end of the day on a regular basis.
5. Inspect the food for any sign of spoilage, damage or infestation.
6. Stacking of similar types of food together.
7. The temperature & humidity control of the area should be proper.
8. Protection against fire is a must.

Equipment required at the Receiving Area :-

1. The area should be at a raised platform so that the unloading can be done
smoothly.
2. Weighing Scale- Electronics are preferred.
3. Separate baskets with color coding for veg, fruits, meat, milk, fish, poultry &
cheese.
4. Trolleys are required to carry these items to the stores / kitchen.
5. An office for maintaining records is required.
6. Staff to receive, check & transport the goods to the store.
7. Thermometers for checking temperature of frozen products.

Receiving Procedure For Highly Priced Items

• On receiving the item it is checked with the S.P.S

• If it tallies with the sps then a tag is made in accordance with the invoice or
delivery note.
• The duplicate of the tag along with the invoice or delivery note is send to the f&b
controls.
• When the item is issued, the tag is removed & with the date of issuing mentioned
on it & again send to the controls.
• Controls usually reconciles the tagged item with the specific items sales, issues,
purchases & the balance shown will give the value of the stock.

Explain Blind Receiving

Blind Receiving :- A blind receiving method is one when the receiving clerk receives
the goods without any invoice or purchase order & listing the goods delivered on a
invoice recording each items by weigh, count, quality check & prices. This invoice is
then send to the finance office for approval. Blind receiving is an accurate method of
checking merchandise & verifying deliveries as it is not just glancing the invoice &
checking the figures with the goods received.

•
What is Meat Tags? Reason for tagging the meat at the receiving.

A piece of paper with the details of date, quality & quantity of the items to be
filled after receiving printed on it is known as meat tag.

REASONS FOR MEAT TAG :-

1) To show the supplier, if there is a question of quality & quantity.

2) To prevent reweighing on issuing.
3) To provide a check on the accuracy of the receiving clerk
4) To help in stock rotation & assist in controlling the stock level.
5) To speed up inventory taking.
6) To make ordering & quality check easy.
7) To store items promptly & properly.

Meat Tag 007

Item Description ………………
………………………………….
Total Weight………………
Total Value ……………….
Cost / kg
Supplier………………………

Date Received ……………….

Date Issued …………………..
Received by …………………...
…………………………………

Frauds in Receiving

1) Bribing the receiving staff

2) Increasing the weights of the items by faulty measures like soaking of meat items
in water for long before chilling.
3) Adulterating the products which comes in large quantity with raw or sub standard
items like in tomatoes or potatoes.
4) Mixing of expired or soon to be expired items with good lots of other canned
products.
 GOOD RECEIVED BOOK

Date Supplier’s Order Delivery Note Detailed Unit Total Remarks

Name Number Number Description Value Value

* Sample goods received book

STORING & ISSUING

What is the main aim or objective of the stores?

The main objective of the food store is to maintain an adequate supply of foods for
the immediate needs of the establishment which are available at all times.
Foods when accepted at the receiving department are then categorized as perishable
and non- perishable items.
The stores then segregate the items for storing into perishable foods which has a high
turnover are send directly to the store in the custody of the chef & the non-
perishables items are stored in the main store.

Some storage guidelines:-

•

1) Groceries & canned goods are stored in the main storeroom. These products should
be stored under a main heading & in alphabetical order.

2) Perishable items should be stored in cold rooms / refrigerators

3) A tag for each bag / packet of meat / fish is to be filled & a detailed record to be
maintained.
4) Only authorized persons should enter the store room.
5) Store keys should be sealed & deposited in the front desk at the end of each day &
the store keeper should only be authorized to issue & deposit the keys.

What should be the facilities & equipments available with the store?

Storage facilities & equipments:-

1) Temperature controlled
2) Proper lighting
3) No humidity
4) Storage containers
5) Shelves
6) Electronic weighing machine
7) Trolleys
8) Pest & rodent controlling equipments
9) Clean & airy environment

What are the security control measures taken in store for the prevention of
theft?

1) Adequate strong lock are to be used.

2) Store room keys should be issued only to designated members authorized by the
chief accountant after entering in the key log book.
3) While issuing the store helper should follow the requisition slip strictly.
 4) Unauthorized persons should not enter the stores.
5) At the end of the day the store keeper should seal the keys in an envelope, put his
signature on it & the deposit it with front office cashier.

What are the different types of goods received in the store & what are the ways
of storing them?

Types of goods received are mainly categorized into perishables & non- perishables,
which are again segregated into vegetables, fish, meat, dairy products, groceries,
canned products, acid products etc.
Different ways of storing are as follows:-

1) Storing at proper storage temperatures like

• Fresh fruits & vegetables except banana 6*C
• Fish 0*C
• Dairy Products 4*C
• Meat 0 to -2 *C
• Frozen items or foods -4*C
• Soft drinks 2*C
• Ice cream for long term storage - 18 *C
• Groceries 20 to 25 *C

2) Keeping the groceries & canned goods stored on shelves by groups as

Spices, condiments, cereals, nuts, preserves etc.

3) Repacking of groceries bought in bulk form into smaller packets for

convenience in issuing & costing.
4) Canned foods & acid products are kept away in a separate corner to
prevent any spoilage of other products if there is any leakage
5) Expensive items should be stored under lock & key like saffron, caviar,
truffles etc.
6) Maintaining of BIN CARD for each item for quick check of stocks.

What are the principles followed during issuing?

Salient practices while issuing are:-

 • Separate requisitions to be received from every department.
• Requisition made should be in triplicate form, the original remains
with the store, second copy with the requisition department & the third
copy remains in the book which is deposited to the controls for further
analysis.
• Meat tags have to be attached with the butchers requisition & send to
F&B controls.
• A requisition must state :-- Date, Name of the concerned department,
Name of items & amount required, Signature of approval by the
H.O.D & also signature of the issuing & receiving party.
• Spoilage reports to be made by the storeroom clerk & should be
informed to the controller
• All requisition to be sent to the F&B Controller’s office on the
following morning.
• At times inter departmental issues are made which has to be
maintained by the respective department like in the form of IKT or
BTK & has to be deposited to the Controller’s Office.

Why stocktaking is necessary?

The main objectives of stocktaking are:--

1. To determine the value of goods held in stock are in accordance with

the financial policy of the establishment & it also helps the accounts
department in calculating its profit & loss account.
2. To compare the physical value & the book value of the stock in a
given period. Value of closing stock = (value of opening stock +
purchases during the period) – requisitions made in the same period
3. To list and identify the slow moving items. Discuss with the Chef &
F&B Manager about how to move them.
4. To take steps against loss & pilferage.
5. To compare the usage of food with food sales to calculate the food
cost, bar cost & gross profit.
6. To determine the rate of stock turnover for different types of food. It is
calculated by the formula :

Cost of food consumed = rate of stock turnover in a given period

Average value of stock at
Cost price
 Explain: 1) Bin Card 2) Par-stock
3) Re-order level 4) Buffer stock

1) Bin Card – The cards are fixed on the shelves or racks against each
beverages or food products mentioning the deliveries & issues made
each day. The bin card number is mentioned in the stock register
against each item for a strong control.
2) Par Stock – The quantity of stock which should be maintained at all
time to ensure that you would not run out of supply while waiting for
your deliveries.

3) Re-order level – It’s the level of stock for certain items when it has to
be ordered which has been set according to its consumption &
availability.

4) Buffer stock – This is a stock which is kept reserved to avoid any short
term shortages in a rotating manner for any kind of emergencies like
strikes or riots etc.

FOOD STORE REQUISITION

Department……………….. Date………….
1.

Sl.No Ingredients Unit Qty. Qty. Unit Total

Requested Issued Cost Cost
Requested by Delivered by Received F&B
………………. ……………….. by Contl
……….

BIN CARD

Bin No. …………… Item …………….

Date Received Issued to A B C Total Balance

Store Keeper ……………………….

 •

PRODUCTION CONTROL

Why Production Control is necessary? What are the stages of

production control? Explain

Production control is necessary because of the following reasons:-

1) Proper production planning reduces wastage & therefore reduces food

cost.
2) Accurate cuts & techniques used in food production increases quality &
quantative production.
3) Loss of revenue from giving excess portion size.
4) Standardization of the products reduces cost & helps in budget planning.

The four basic stages of production control are:-

1) Production planning
2) Standard yields
3) Standard recipes
4) Standard portion sizes

Production planning – It can also be known as volume forecasting as it is done to

reduce the food cost by controlling over production. It also facilitate the purchasing of
food stuffs, particularly perishable items, & ensure appropriate stock levels are
maintained.
To gear production to demand by forecasting the number of meals according to the
market trends like season, festive occasions, major events occurring in the area, sales
promotion activities, advance bookings etc. This can also be planned by a detailed study
of sales histories.

Standard yields – The standard yield of a particular food product is the usable or edible
part of that product after cleaning or trimming which is for the final production &
presentation. For example the standard yield for a whole fish fillet is the number of
portions of fish fillet we get after trimming or de-boning, but usable trimmed portions
like for fish finger should be taken into account with the standard yield.

The advantages of standard yields in an establishments are:-

1) It determines the most appropriate & advantageous size/weight to buy a particular
commodity.
2) It act as a double check of the purchased item by the kitchen if there is any
unsatisfactory delivery.
3) They act as a safeguard against pilferage or wastage occurring in the kitchen as the
actual & the potential yields can be compared & act as a measurement of the efficiency of
the kitchen.
4) The best thing is that it provides an accurate measure of food cost for every particular
dishes offered in the menu.

The various tests to arrive at Standard Yields are:-

* Raw food test – To determine the best cost & weight for fruits & vegetables for
specific use.
* Cost food test – The yield on actual cost after considering weight, quality, and
uniformity.
* Butchers yield test – Actual portion cost of meat after waste removal & trimming
but considering the by products.
* Cooking test – The final portion cost after cooking, slicing & reducing, only
considering the service portion.
•

Standard recipes -- Standard recipes are the most simplified way of writing a recipe and
include simplified steps to follow and exact amounts of food commodity used. Apart
from the basic information it may provide with the costing & nutritive value of the dish.
The recipe card is generally kept in the control department for cost & price updating.

Advantages of standard recipe are:-

1)Accurate purchasing is impossible without the existence and use of standardized

recipes
2) Dietary concerns require some foodservice operators(hospitals) to know exactly
the kinds of ingredients and the correct amount of nutrients in each serving of a menu
item
 3) Accuracy in menu laws require that foodservice operators be able to tell guest
about the type and amount of ingredients in their recipes

4) Accurate recipe costing and menu pricing is impossible without standardized

recipes

5) The use of standard recipe in the production area ensures that the customer will
always receive a standardized product.

Standard Portion Sizes – It is the quantity of a particular food item that will be served to
the customer. The quantity may be measured in terms of grams or in numbers. Portion
size charts must be displayed in each working area as a continual remember to the
kitchen staff & to maintain a standard cost. Equipments for standard portioning like
scope, scales, measures, bowls etc should be there with the kitchen staff.

What is standardization of cost?

Costing of each dish in bulk or by portions according to the standard portion size &
standard recipe is termed as standardization of cost. If F&B department can forecast
accurate portion sales then with the help of standard cost we can set our goals for sales
for a particular day, event or period of time.

How control measures are taken during food production? What are the
reasons of food cost variance?

Control measures are taken during food production are:-

1) Yield & product testing practiced to established & measure standard of products.
2) Production to be related to volume forecasts.
3) Maximum use to be made of standard recipes.
4) Efficient scheduling of production to be made so as to ensure maintenance of
quality of dishes produced
5) All equipment to be regularly maintained so as to ensure the standard yields &
quality of dishes are maintained.

Major reasons for food cost variance are:-

1) Inaccurate arithmetic to paperwork. This also includes the paperwork of the

suppliers.
2) Inefficient stocktaking.
3) Poor revenue control. Lack of systematic procedures & practices.
4) Poor menu. Unrelated to market conditions & requirements, lack of sales analysis
& updating of menu.
5) Poor purchasing, resulting in higher food costs, overstocking & wastage.
6) Poor receiving, inferior goods being accepted, short weight of goods being signed
for.
7) Poor storing, poor rotation of stock resulting in wastage, poor security.

What are the cost control measures taken in food production

department?

Control measures are taken in food production department are:-

1) Check & marry up all delivery notes, credit notes, invoices, & goods received
report.
2) Check arithmetic to all paper work.
3) Check correct discounts are being allowed
4) Check delivery notes to bin cards / ledgers.
5) Check & recode temperatures of all the walk-ins at regular interval.
6) At set periods take a full inventory of all chargeable containers.
7) At set periods complete a full stock take of all food stores & food held in the
kitchens & compare to ledgers.
8) Prepare a stocktaking report and stocktaking variance report.
9) Maintain up-to-date food control & food cost reports.

BEVERAGE CONTROL

What are the beverage cost control procedures?

Beverage cost control procedures are:-

1) Check & cross-reference delivery notes, credit notes, invoices & goods
received report.
2) Check arithmetic to all paper work.
3) Check correct discounts are being allowed.
4) Check delivery notes, with the cellar inward book.
5) Maintain beverages perpetual inventory book.
6) Maintain container charges & credit for period inventory.
7) At set periods complete a full inventory of all chargeable containers, for
example crates, soda bottles etc.
8) At set periods complete a full inventory of cellar & compare to beverage
perpetual inventory book.
9) Prepare a stocktaking report of value & type of goods, rate of stock
turnover, etc.
10) At fixed intervals take full inventory of the stock of each bar for beverage
control reports.
11) Prepare end of period beverage reports for management & highlight any
problem areas for corrective action.

What are the different methods of beverage cost control & how
they are analyzed at the end of day or month?

There are various methods used today to control costs, it depends upon the
size of operation & volume of business. There are basically six types of
beverage control system are as follows:-

1) Bar cost system - It is similar to that of the basic food cost report like
issues to & from the bar and the stock take of each bar have been at cost
price is taken into consideration. The bar cost report is made assuming that
any beverage issued is for sale that day. This report gives a detail analysis
on the individual performance of each bars in a unit. Physical stock take of
bar on closing of previous day, total beverage requisition by the bar on the
day, total food requisition by the bar, kitchen requisition of beverages
from the bat & total physical stock take of the bar on closing all taken into
consideration while calculating the bar cost.
2) Par stock or bottle control system – The level of par stock is established
for each beverage like the number of bottles required for a busy day plus a
small safety factor. The determined number of stock level is to be
maintained in the bar at the beginning of each day & only full bottles are
counted, partial ones are not counted. The number & type of each empty
bottles are counted which has to be requisitioned for the day. The potential
sales are based on the quantities issued at selling price and are compared
to actual revenue received. This system is useful for smaller establishment
& where mixed drinks are limited.
3) Potential / standard sales value system - In this system a potential value is
fixed for each bottle of beverage, the revenue is fixed according to the size
of the drinks & the contents of the bottle. In this system full bottles of sprit
is sold in a price fixed by the management usually lower than what it
worth if sold by glass. Potential sales value of bottle of beverage is fixed if
sold by glass is calculated as follows :-
Size of bottle – 750l , Size of a drink – 50ml, Selling price of a drink as per
management – Rs.200, Number of drinks in a bottle – 15. So Potential /
standard sales value of the bottle is – 200 x 15 = 3000.

4) Inventory system – In this system inventory of the beverages is taken daily

& any differences between the actual & the potential results are shown in
the beverage report. This is most accurate but time consuming method of
determining the amount of beverage sold.
5) Automated beverage dispensing system—There are many types of
mechanical & automated beverage dispensing machines are available, all
designed to assist management in controlling beverage costs but the cost
of installing such machine is high & these are suitable only for bars with
very high volume of sales and where the customer is not so concerned
with the traditional bar service or personalized service like making of
cocktails etc. The sale analysis of such system is easier than other methods
as the dispensers are connected with the micro computers directly for
controlling & raising the bill.