Foundations of cost control by daniel traster chapter01

chapter 1

Introduction to
Cost Control

Class Name
Instructor Name
Date, Semester

Foundations of Cost
Control
Daniel Traster


Opening Questions

What is “Cost Control”?

What role does math play in cost
control?
Why must we learn math as part of cost
control?
2


Math Gives Information but Not Direction
Case Study

• Restaurant loses 50 pens/week to customers
signing credit card receipt
• Cost of lost pens = $5/week or $260/year

• Normal company profit only $20,000/year
• What should the manager do in this
situation?
• Many possible answers!
3


Revenue, Expenses, Profit
Managers control revenue and expenses
to generate profit

Revenue: Money collected from sales
Expenses: Money paid out for labor, products, or
services
Profit: Money left from revenue after expenses are
paid.
Loss: Balance owed if expenses exceed revenue
4


Formula

PROFIT
(or loss)

=

Revenu- Expenses
e

5


Example 1a
Business has $87,000 in expenses and
$89,500 in revenue. Calculate profit or
loss.
Profit (loss) = Revenue – Expenses
= $89,500 - $87,000
= $2,500 profit

6


Example 1b
Business has $147,000 in revenue and
$150,200 in expenses. Calculate profit or
loss.
Profit (Loss) = Revenue - Expenses
=$147,000 - $150,200
= -$3,200 or ($3,200)
Negatives often written in parentheses

7


Types of Revenue
Food Sales
Beverage Sales
Other

―room rental charges
―merchandise sales
―etc.

8


Types of Expenses
•

Food Cost

•

Utilities

•

Beverage Cost

•

•

Labor Cost

Repair and
Maintenance

•

Direct Operating
Cost

•

Equipment
Purchases

•

Marketing,
Advertising,
Promotion

•

Administrative and
General Costs

•

Occupation Costs

•

Interest

•

Music and
Entertainment

9


Types of Loss

Loss
Theft

Waste via
Production

Spoilage

10


Control through the Flow of Food

Purchasing

Receiving
And
Storage

Issuing

Recipe

Production

Presentation
And
Portion
Control

Sales
Control

11


Other Key Control Points

Employee
Scheduling

&

Forecastin
g

12


Closing Questions
A point-of-sales system can calculate many
of the formulas that will be covered in the
book.

So why is it important to study the math behind
cost control?

What role should a computer play and what role(s)
can it not play?
13