FSM 8 Catering Menu Pricing and Control PDF

FSM 8 CATERING MENU PRICING AND CONTROL Prepared by: Ms. Angela E. Pineda, LPT OBJECTIVES AT THE END OF THE LESSON STUDENTS SHOULD BE ABLE TO: Demonstrate in-depth FSM 8 understanding of Menu pricing and cost control of a catering Demonst...

FSM 8 CATERING MENU PRICING AND CONTROL Prepared by: Ms. Angela E. Pineda, LPT OBJECTIVES AT THE END OF THE LESSON STUDENTS SHOULD BE ABLE TO: Demonstrate in-depth FSM 8 understanding of Menu pricing and cost control of a catering Demonstrate knowledge of CAFETERIA MENU PRICING standardizing recipe AND CONTROL  MENU Classification of IA Cost by Nature FETER PRI ING C or Element CA FSM 8 COST AND PROFIT Direct Cost Indirect Cost Direct Cost These costs are directly tied to the production of goods or services and easily identified and assigned to a specific product or job.. 1. Direct Material Include all materials specifically purchased or requisitioned for specific cost unit, all primary packing materials. 2. Direct Labor It includes wages paid to workers directly involved in production, as well as those supervising or maintaining the production process. 3.areDirect Expenses also known as chargeable expenses specifically as they are charged directly to the particular unit of cost concerned.  Indirect Cost These are costs which cannot be assigned to any particular cost and cannot be tied to a single item. Instead, these are incurred for the whole and overall operation of the divided among different cost units 1. Indirect Material such as fuel, lubricating oil, small tools, and material consumed for repairs and maintenance work, miscellaneous stores used in the factory, etc. 2. Indirect Labor which includes wages of general supervisors, inspectors, workshop cleaners, store-keepers, time-keepers, etc. 3. Indirect Expenses such as rent, lighting, insurance, canteen, hospital, welfare expenses, etc. Indirect costs are also called ‘Overheads’.  Overheads may be further classified as: FACTORY OVERHEADS which include all indirect expenses connected with the manufacture of a product such as lubricants, oil, consumable stores, works manager’s salary, time-keeper’s salary; factory rent, factory insurance, etc. OFFICE AND ADMINISTRATION OVERHEADS which include all indirect expenses relating to administration and management of an office such as office rent, office lighting, insurance, salaries of clerical and executive staff, etc.  Overheads may be further classified as: SELLING AND DISTRIBUTION OVERHEADS which include all indirect costs connected with marketing and sales such as advertising expenses, salaries of salesmen, indirect packing material, etc. FUNCTIONAL CLASSIFICATION OF COST FUNCTIONAL CLASSIFICATION OF COST 1. PRIME COST consists of the costs of direct materials that go into the product, the costs of direct labour and direct expenses. It is also known as direct cost or first cost. 2. FACTORY COST consists of prime cost-plus factory overhead or works expenses or factory on cost. Factory cost is also known as works cost, production cost or manufacturing cost. FUNCTIONAL CLASSIFICATION OF COST 3. COST OF PRODUCTION Also called office cost, administration cost or gross cost of production, it consists of factory cost plus office and administrative expenses. 4. TOTAL COST OR COST OF SALES It comprises cost of production plus selling and distribution overheads. CLASSIFICATION OF COST ON THE BASIS OF BEHAVIOR: Classification of Cost on the Basis of Behavior: 1. Variable Costs: Costs that vary almost in direct proportion to the volume of production. Change in direct proportion to the level of goods or services a company produces. As production increases, variable costs rise; as production decreases, variable costs fall. Example: If a company produces more units, it will need more raw materials, so the total cost for those materials will increase. If production decreases, the cost of raw materials will decrease as well. Classification of Cost on the Basis of Behavior: 2. Fixed Costs Remain constant irrespective of the level of output. It must, however, be noted that fixed costs do not remain constant for all times. Example: Rent for the restaurant or kitchen space: Whether the restaurant serves 10 customers or 100 customers in a day, the rent remains the same. Classification of Cost on the Basis of Behavior: 3. Semi-variable Costs Those costs which are partly fixed and partly variable. Also known as “mixed cost”. Example: A business may pay a fixed amount for basic utilities, but the bill increases as more machines are used or production increases. Fixed Portion - basic utility charge Variable Portion - the amount of using equipment  Classification of Costs for Managerial Decisions and Control Classification of Costs for Managerial Decisions and Control 1. Controllable and Uncontrollable Costs Controllable - controlled or influenced by a specified person or a level of management of an undertaking Uncontrollable - cannot be so controlled or influenced by the action of a specified individual of an undertaking are known as uncontrollable costs. Classification of Costs for Managerial Decisions and Control 2. Normal and Abnormal Costs Normal - These costs are predictable and necessary for producing goods or delivering services. Abnormal - Unexpected or irregular expenses that arise outside the normal operations of a business. These costs are usually unforeseen, non-recurring, and are often the result of unusual circumstances like accidents, natural disasters, or inefficiencies. Example: Food spoilage Classification of Costs for Managerial Decisions and Control 3. Avoidable and Unavoidable Costs Avoidable - those costs which can be escaped or avoided if some activity of the business to which they relate is discontinued. Unavoidable Costs - are those which cannot be escaped or eliminated. Classification of Costs for Managerial Decisions and Control 4. Shut Down and Sunk Costs Shut Down - fixed costs which have to be incurred even if production or operations of an undertaking are discontinued temporarily due to certain reasons such as strike, shortage of raw material, etc Sunk Costs - Costs which have been incurred and are irrelevant in a particular situation. Already been spent and can’t be changed or recovered. Classification of Costs for Managerial Decisions and Control 5. Product Costs and Period Costs Product Costs - costs which are associated with production and which become part of the cost of the product. Example: raw materials Period Costs - an expense that is not directly tied to the production of goods but is instead related to the time period in which it is incurred. Example: administration costs, rent, insurance, salesmen salaries, etc. Classification of Costs for Managerial Decisions and Control 6. Incremental and Decremental Costs: Incremental - the change increases the cost Decremental- change decreases the cost. Classification of Costs for Managerial Decisions and Control Opportunity Costs - refers to the advantages foregone as a result of adopting one course of action. Conversion Cost: it is the cost of converting or transforming raw materials into finished products. Break-even and Food Costing BREAK-EVEN The amount of sales, costs and price at which there is neither a loss nor a gain in business. At the break-even point, a business has covered all its fixed and variable expenses, but hasn’t yet made any profit It's when businesses know how much to sell to start making a profit. FOOD COSTING Food costing is the method of determining the overall expense of ingredients needed to make a dish. It helps businesses price their menu items to cover costs and earn profit. This process includes monitoring ingredient costs, portion sizes, and waste to maintain profitability.  FSM 8 Thank You