HTM*2020nUnit 7

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University of Guelph *

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2030

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Industrial Engineering

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Dec 6, 2023

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Unit 7 Chapter 10 & 11 Lectures 13 & 14 Chapter 10: Monitoring Foodservice Operations III: Actual versus Standard Food Costs • LEARNING OBJECTIVES • After reading this chapter, you should be able to: 10.1 Define standard cost and explain how it is calculated. 10.2 Calculate and compare actual and standard costs using the daily method. 10.3 Describe how to use a Menu Pre-Cost and Abstract form. 10.4 Define variance or potential savings and list several conditions that affect it. 10.5 Calculate and compare actual and standard costs using the periodic method. • Achievable standards are those that are realistically within reach. Such standards take into account normal variances and inefficiency. • Ideal standards may never be reached. They represent what would result in a perfect situation (no spoiled goods, no worker errors, etc.). Many foodservice operations avoid ideal standards because they fear that employees will see ideal standards as meaningless since they cannot hope to achieve them. Variances – compare standard and actual costs, and mathematical deviations between the two Standard cost - Actual costs can be compared with standard costs, and any difference between them will be a useful measure of the extent to which the standards and standard procedures are being followed. This difference indicates both the degree of inefficiency in day-to-day operations and the |extent to which costs can be reduced w/o compromising or reducing standard - 2 methods for comparing actual and standard costs o 1 st requires calculations of standard costs and actual costs for the day for all days thus far in the operating period o 2 nd does not require daily calculations, relying instead on periodic determination of standard costs from records of actual portion sales in the period - If standard cost and selling price for standard portions are established and forecasts have been made, it is possible to determine in advance what food cost percent should be
- At end of day or service when actual portions sales have been tallied to add to the sales history, this info can be used to determine what standard cost and cost percent those actual sales produce Menu pre-cost and abstract - divided into two parts o the section on the left—the forecast section—is based on a sales forecast prepared sometime before a day or a meal. o The section on the right—the abstract section—is completed later, after the day or service for which the forecast was prepared. - All menu items including appetizers and desserts are included on the form Standard cost and sales figures may be raised or lowered depending on which is desirable, by the following means 1. Sales prices may be changed. 2. Standard portion costs may be changed by altering portion standards— sizes, ingredients, recipes, or some combination of these. 3. Menu items may be added or eliminated. 4. The popularity index can otherwise be manipulated Abstract - Right-handed portion of the form - Prepared after the sales have taken place
Actual cost percent - for any given day equals actual cost for that day divided by sales for that day. - Actual cost percent to date on any day equals actual cost to date for all the days thus far in the period, divided by sales to date for all the days thus far in the period Standard cost percent - for any given day equals standard cost for that day divided by sales for that day. - Standard cost per- cent to date on any day equals standard cost to date for all the days thus far in the period, divided by sales to date for all the days thus far in the period. Potential savings - The difference or variance btw actual cost and standard costs - May be recorded as dollars, as percentages of sales or as both Periodic comparison - where daily calculations of standard costs and variance are impractical, it is often possible to adopt an alternative method that relies on peri- odic calculations for determining discrepancies - the periodic method presupposes that standards and standard procedures have been established for all phases of operations, that sales histories are maintained, and that standard portion costs are known.
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