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Calculating Actual Food and Beverage Costs 11/26/2012

Competencies for Calculating Actual Food and Beverage Costs:

Calculate the basic monthly cost of sales for food and beverages. Use the FIFO method to calculate the value of products in inventory. Use the LIFO method to calculate the value of products in inventory, and describe the actual cost method. Use the weighted average method to calculate the value of products in inventory, and discuss inventory counting procedures. Competencies for Calculating Actual Food and Beverage Costs 11/26/2012

Competencies for Calculating Actual Food and Beverage Costs:

Identify adjustments used to calculate a monthly net cost of sales for food and beverages. Describe daily calculations of actual food and beverage costs, and explain how the daily beverage cost percentage worksheet can be used to assess a bartender’s performance. Describe how current technology helps managers monitor food and beverage costs. Competencies for Calculating Actual Food and Beverage Costs (continued) 11/26/2012

Comparing Actual Costs to Standard Costs:

Actual costs must be stated in the same manner as standard costs Cost calculations must cover same meal periods Factors used to determine standard costs must be used in calculating actual costs Actual costs must be assessed on a timely basis Comparing Actual Costs to Standard Costs 11/26/2012

Cost of Sales:

Actual costs incurred to produce all food and beverage items sold during an accounting period Cost of Sales = beginning inventory + purchases – ending inventory Cost of Sales 11/26/2012

Cost of Sales Information:

Beginning Inventory Physical Inventory forms—end of previous month Purchases Daily receiving reports Ending Inventory Physical inventory forms—end of current month Cost of Sales Information 11/26/2012

Inventory Valuation—FIFO:

Earliest product costs are applied to products issued from storage Most recent product costs are applied to products left in inventory Tends to create a higher total inventory value because the more recently purchased products with typically higher costs remain in inventory Inventory Valuation—FIFO 11/26/2012

Inventory Valuation—LIFO:

Most recent product costs are applied to products issued from storage Earliest product costs are applied to products left in inventory Tends to create a lower total inventory value because most recent costs are first issued and most recent costs are typically higher than products purchased in the past Inventory Valuation—LIFO 11/26/2012

Inventory Valuation—Weighted Average:

Takes into account the actual quantities of each product in inventory purchased at different prices Determines average price of items received during the month Calculates inventory value by multiplying average price paid by quantities in storage at the end of the month Inventory Valuation—Weighted Average 11/26/2012

Adjustments to Basic Cost of Sales:

Food transfers Beverage transfers Employee meals Complimentary food and beverages Adjustments to Basic Cost of Sales 11/26/2012

Food Transfers:

From kitchen to bar—fruits, garnishes, food Transfers used to generate beverage revenue Transfer memo serves as source document Decrease cost of food sales Increase cost of beverage sales Food Transfers 11/26/2012

Beverage Transfers:

From bar to kitchen—cooking liqueurs and tableside desserts Transfers used to generate food revenue Transfer memo serves as source document Decrease cost of beverage sales Increase cost of food sales Beverage Transfers 11/26/2012

Employee Meals and Complimentary Food/Beverages:

Employee meals Costs charged to labor or employee benefits account Decrease cost of food sales Complimentary food and beverages Costs charged to marketing/promotion account Decrease cost of food sales Decrease cost of beverage sales Employee Meals and Complimentary Food/Beverages 11/26/2012

Food Cost Calculations—Directs:

Typically inexpensive/perishable products—fresh produce, bakery, dairy items Purchased frequently, as needed Recorded on daily receiving report Physically stored but not entered into inventory records Charged to food costs on the day they are received Food Cost Calculations—Directs 11/26/2012

Food Cost Calculations—Stores:

Less perishable than directs Purchased on basis of anticipated need Recorded on daily receiving report Requisition system used to issue from storage and adjust inventory records Charged to food costs as they are issued Food Cost Calculations—Stores 11/26/2012