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Management Principles

Budget A prediction of anticipated revenue and expenditures for a specific period of time
Cost resources expended to achieve an objective
Types of Budgets 1. Master 2. Operating 3. Cash Budgets 4. Capital Budgets
Food Cost/ meals serve Food Cost per Meal Formula
Income/Meal equivalent Meal Volume Formula
Food cost --------- x 100 Income Food Cost percentage formula
Mark-up factor = _______100_______ % income for food Selling price = mark-up factor X raw food cost Determining Selling Price formula
Mark-up factor =___ 100______ Food cost % Raw food cost X % hidden cost = hidden cost Raw food cost + hidden cost = adjusted food cost Selling price = mark-up factor X adjusted food cost Conventional Method formula for determining selling price
Prime cost = raw food cost + labor cost* Mark-up factor = __100_____ (Food cost % + labor cost %) Selling price = prime cost X mark-up factor *Labor cost = Divide # min by 60, then multiply by $/hr. Prime Cost Method for determining selling price
Fixed cost/1-(variable costs/sales) Break even point formula
Multiply the # of employees by the # of hours worked per wk Add up all of the hrs Divide by 40 Example: A foodservice has ten 40-hr employees, 3 20-hr employees,& five 16-hr employees (10)(40)+(3)(20)+(5)(16) = 540 hrs 540/40=13.5 FT Calculating FTE (full-time equivalent) per week
Total number of meals served/ Total hrs of labor to produce the meals Meals per hour formula
Total number of meals served/ Total FTE's to produce the meals Meals per full time equivalent formula
Total min of labor time to produce the meals/Total number of meals served Labor minutes per meal formula
number of meals sold x sales average Total revenue formula
Labor cost/total revenue Labor cost percentage formula
What is a master budget? 1. coordinates every aspect of operation 2. compilation of several small budgets (operating, cash, capital)
What is a operating budget? forecast of revenue (sales), expenses; profit day to day guide includes: statistics budget-estimate of volume of sales in commercial services in non-commercial operations *based on historical data revenue budget-projection of the expected income
What is a cash budget? 1. projects receipt of revenue & expenditure of funds 2. determine if funds are available when needed *identify cash availability at any given time
What is a capital budget? long term plan, estimates/predicts cost of capital expenditures
Fixed Budget Set dollar amount based on predetermined activity Based on past sales & cost, considers future change Rigid
Flexible Budget Dollar range for levels of activity Takes into account variability in activities
Zero-based Start with “blank piece of paper” each year Evaluate all activities, justify every request for funds
What are the five phases of budget planning continued? Evaluation Phase: Dissects past performance, identifies factors influencing future activities Preparation or planning phase: Uses info from evaluation phase to forecast and prepare for 1st draft of budget
What are the five phases of budget planning? 1. Evaluation phase 2. Preparation or planning phase 3. Justification phase 4. Implementation or execution phase 5. Control phase
What are the five phases of budget planning continued Justification phase: Review, revise, give final approval on budget Implementation or execution phase: Translate budget expenditures into operation function Control phase: Ongoing monitoring process
Budget Write up List sources of expected income Classify & list expenses w/ cost Food, labor, overhead, operating costs Other data # meals, labor hours, expected changes, new totals Justification for request of new funds Review, make changes Final form w/ justific
Records for Control Purchasing & receiving, storage & storeroom control, production & service of food, cash transactions, operating & maintenance, and personnel
Service and Income and Expense Records Service records: number served Used to collect and track demand Help to control & monitor cost to forecast future budget Income/Expense: Daily transactions Sources & amounts of income and where it goes
Ssles/Cash receipts Records Sales/Cash receipts Cash registers, POS, Number of sales, total sales, tax, servings of types of foods
Daily food-cost Report Prepared from 4 records Cash receipts record of total income Census record Storeroom issues Invoices of perishable foods Most valuable report - Info about sales, food cost, # served % income for food: food-cost percentage
Profit and loss Statement Summary comparison of income to determine profit and loss for a given period Includes all expenses Prepared at end of calendar month Income (sales) Less: cost of food Equals: gross profit Less: labor, overhead, operating Equals: net profit, loss
Food-Cost % Divide cost of food for the day by income of the day Food Cost: $530/Income: $1,280 = .414 X 100 = 41.4% Varies depending on type of organization, goals, characteristics and expenses Use cumulative figures for the month to determine average
Cost Control Food Cost: most readily controlled item, subject to greatest fluctuation Menus: 1st & most important step in controlling food cost Determine what and how much food to purchase & prepare
Labor cost control 50-70% of total food service expenses
Created by: surfinbird