PAMANTASAN NG LUNGSOD NG MAYNILA

(University of the City of Manila)

General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

HM 112 COST CONTROL (FOOD & BEVERAGE)

MANAGING REVENUE AND EXPENSE

This segment presents the relationship among:

 foodservice revenue
 expense
 and profit

As a professional foodservice manager, you must understand the relationship that exists between
controlling these three areas and the resulting success of your operation. In addition, the unit presents the
mathematical foundation (―Accounting‖ - a method that is the standard within the hospitality industry), you
must know to express your operating results as a percentage of your revenue or budget.

Lesson Outline

Professional Foodservice Manager

Profit: The Reward for Service
Getting Started (The Flow of Cost Control
Understanding the Profit and Loss Statement
Understanding the Budget

HIGHLIGHTS
At the conclusion of this chapter, you will be able to:

1. Apply the basic formulas used to determine profit.

2. Express both expenses and profit as a percentage of revenue.
3. Compare actual operating results with budgeted operating results.

Key Terms Concepts:

Costs – as the expense to hotel or restaurant for goods or services when the goods are consumed of
services rendered; the sum of all money paid out during a given period of time.
Control – is a process used by managers to direct, regulate and retrain the actions of people so that the
established goals of enterprise may be achieved.
Cost Control – the process used by managers to regulate costs and guard against excessive costs.. is the
practice of identifying and reducing business expenses to increase profits, and its starts with the
budgeting process; is an important factor in maintaining and growing profitability.

Managing Revenue and Expense | [Cost Control] 1

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

PROFESSIONAL FOODSERVICE MANAGER

A professional foodservice manager is unique because all of the functions of product sales, from item
conceptualization to product delivery, are in the hands of the same individual. As a manager, you are in
charge of securing raw materials, producing a product, and selling it—all under the same roof. Few other
managers are required to have the breadth of skills that effective foodservice operators must have.
Because foodservice operators are in the service sector of business, many aspects of management are
more difficult for them than for their manufacturing or retailing management counterparts. A foodservice
manager is one of the few types of managers who actually have contact with the ultimate customer. This
is not true of the manager of a tire factory or automobile production line. These individuals produce a
product, but they do not sell it to the person who will actually use their product.

The management task checklist in Figure 1.1 shows just some of the areas in which foodservice,
manufacturing, and retailing managers vary in responsibilities. In addition to your role as a food factory
supervisor, you must also serve as a cost control manager, because, without performing this vital role,
your business might cease to exist. Foodservice management provides the opportunity for creativity in a
variety of settings. The control of revenue and expense is just one more area in which the effective
foodservice operator can excel. In most areas of foodservice, excellence in operation is measured in
terms of producing and delivering quality products in a way that ensures an appropriate profit for the
owner of the business.
Foodservice Manager - are responsible
for the daily operation of restaurants
and other establishments that prepare
and serve food and beverages. They
direct staff to ensure that customers are
satisfied with their dining experience
and the business is profitable.

Manufacturing Manager - monitors all

aspects of the production process,
implements quality control programs that
ensure the finished product meets a
certain standard, and ensures that all
personnel and resources have been
properly allocated.

Retail Manager – are responsible for

every aspect of the day-to-day
supervision of retail outlets, including
sales, staff, stock and resources
management.

The Role of the Food and Beverage Manager

Major Activities:
1. Communication is the ongoing process of exchanging information between different departments
and people within and outside the organization.
2. Cost Control, management institutes procedures and monitors feedback to ensure that all part of the
organization are functioning effectively and moving towards overall company goals.
3. Revenue Enhancement or beats costs, the company gains a profits. Also considered as one of the tool
used to measure the effectiveness of managers.
4. Forecasting is the process of estimating or predicting future expenses and revenues.
Managing Revenue and Expense | [Cost Control] 2
 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

PROFIT: THE REWARD FOR SERVICE

It is important to remember that guests cause businesses to incur costs. You do not want to get yourself
in the mind-set of reducing costs to the point where it is thought that ―low‖ costs are good and ―high‖ costs
are bad. A restaurant with $5 million in revenue per year will undoubtedly have higher costs than the
same size restaurant with $200,000 in revenue per year. The reason is quite clear. The food products,
labor, and equipment needed to sell $5 million worth of food is likely to be greater than that required to
produce a smaller amount of revenue. Remember, if there are fewer guests, there are likely to be fewer
costs, but fewer profits as well! Because that is true, when management attempts to reduce costs, with no
regard for the impact on the balance between managing costs and guest satisfaction, the business will
surely suffer. In addition, efforts to reduce costs that result in unsafe conditions for guests or employees
are never wise. While some shortterm savings may result, the expense of a lawsuit resulting from a guest
or employee injury can be very high. Managers who, for example, neglect to spend the money to salt and
shovel a snowy restaurant entrance area may find that they spend thousands more dollars defending
themselves in a lawsuit brought by an individual who slipped and fell on the ice.
As an effective manager, the question to be considered is not whether costs are high or low. The
question is whether costs are too high or too low, given management’s view of the value it hopes to
deliver to the guest and the goals of the foodservice operation’s owners. Managers can eliminate nearly
all costs by closing the operation’s doors. Obviously, however, when you close the doors to expense, you
close the doors to profits. Expenses, then, must be incurred, and they must be managed in a way that
allows the operation to achieve its desired profit levels.
Some people assume that if a business purchases a product for $1.00 and sells it for $3.00, the
profit generated equals $2.00. In fact, this is not true. As a business operator, you must realize that the
difference between what you have paid for the goods you sell and the price at which you sell them does
not represent your actual profit. Instead, all expenses, including advertising, the building housing your
operation, management salaries, and the labor required to generate the sale, to name but a few, are
expenses that must be subtracted before you can determine your profits accurately.

Every foodservice operator is faced with the following profit-oriented formula:

Thus, when you manage your facility, you will receive revenue, the money you take in, and you will incur
expenses, the cost of the items required to operate the business. The dollars that remain after all
expenses have been paid represent your profit. For the purposes of this book, the authors will use the
following terms interchangeably: revenues and sales; expenses and costs. This formula holds even in the
―nonprofit‖ sector of foodservice management.

For example, consider the situation of Hector Bentevina. Hector is the foodservice manager at the
headquarters of a large corporation. Hector supplies the foodservice to a large group of office workers,
each of whom is employed by the corporation that owns the facility Hector manages. In this situation,
Hector’s employer clearly does not have ―profit‖ as its primary motive. In most business dining situations,
food is provided as a service to the company’s employees either as a no-cost (to the employee) benefit or

Managing Revenue and Expense | [Cost Control] 3

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

at a greatly reduced price. In some cases, executive dining rooms may be operated for the convenience
of management. In all cases, however, some provision for profit must be made. Figure 1.2 shows the flow
of business for the typical foodservice operation. Note that profit must be taken out at some point in the
process, or management is in a position of simply trading cash for cash. In your own operation, if you find
that revenue is less than or equal to real expense, with no reserve for the future, you will likely also find
that there is no money for new equipment; needed equipment maintenance may not be performed;
employee raises (as well as your own) may be few and far between; and, in general, the foodservice
facility will become outdated due to a lack of funds needed to remodel and upgrade. The truth is, all
foodservice operations need revenue in excess of expenses if they are to thrive. If you manage a
foodservice operation in a profit

FIGURE 1.2 Foodservice Business Flowchart Cash reserves

Revenue – money
you take in to operate
the business.

Expenses – cost of
all items required to
operate the business

Profits – remaining
amount (dollar) after
all expenses have
been paid .

Profit should not be viewed as what is left over after the bills are paid. In fact, careful planning is
necessary to earn a profit. In most cases, investors will not invest in businesses that do not generate
enough profit to make their investment worthwhile. The restaurant business can be very profitable;
however, there is no guarantee that an individual restaurant will in fact make a profit. Some restaurants
do, while others do not. Because that is true, a more appropriate formula, which recognizes and rewards
the business owner for the risk associated with business ownership or investment, is as follows:

Ideal expense, in this case, is defined as management’s view of the correct or appropriate amount of
expense necessary to generate a given quantity of revenue. Desired profit is defined as the profit that
the owner wants to achieve on that predicted quantity of revenue. This formula clearly places profit as a
reward for pro viding service, not a leftover. When foodservice managers deliver quality and value to
their guests, anticipated revenue levels can be achieved and desired profit is attainable. Desired profit
and ideal expense levels are not, however, easily achieved. It takes an astute foodservice operator to
consistently make decisions that will maximize revenue while holding expenses to the ideal or
appropriate amount.
Managing Revenue and Expense | [Cost Control] 4
 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

REVENUE

To some degree, you can manage your revenue levels. Revenue dollars are the re sult of units sold.
These units may consist of individual menu items, lunches, din ners, drinks, or any other item produced
by your operation. Revenue varies with both the number of guests frequenting your business and the
amount of money spent by each guest. You can increase revenue by increasing the number of guests
you serve, by increasing the amount each guest spends, or by a combination of both approaches. Adding
seating or drive-through windows, extending operating hours, and building additional foodservice units
are all examples of management’s efforts to increase the number of guests choosing to come to the
restaurant or foodservice operation. Suggestive selling by service staff, creative menu pricing
techniques, as well as discounts for very large purchases are all examples of efforts to increase the
amount of money each guest spends.

The focus of this text is on managing and controlling expenses, not generating additional revenue. While
the two topics are clearly related, they are different. Marketing efforts, restaurant design and site
selection, employee training and food preparation methods are all critical links in the revenue-producing
chain. No amount of effective expense control can solve the profit problems caused by inadequate
revenue resulting from inferior food quality or service levels.

There are four major foodservice expense categories that you must learn to con trol.

They are:
1. Food costs
2. Beverage costs
3. Labor costs
4. Other expenses

FOOD COSTS
Food costs are the costs associated with actually producing the menu items a guest selects. They include
the expense of meats, dairy, fruits, vegetables, and other categories of food items produced by the
foodservice operation. When com puting food costs, many operators include the cost of minor paper
and plastic items, such as the paper wrappers used to wrap sandwiches. In most cases, food costs will
make up the largest or second largest expense category you must learn to manage.

Managing Revenue and Expense | [Cost Control] 5

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

BEVERAGE COSTS
Beverage costs are those related to the sale of alcoholic beverages. It is interesting to note that it is
common practice in the hospitality industry to consider beverage costs of a nonalcoholic nature as an
expense in the food cost category. Thus, milk, tea, coffee, carbonated beverages, and other nonalcoholic
beverage items are not generally considered a beverage cost. Alcoholic beverages accounted for in the
beverage cost category include beer, wine, and liquor. This category may also include the costs of
ingredients necessary to produce these drinks, such as cherries, lemons, olives, limes, mixers like
carbonated beverages and juices, and other items commonly used in the production and service of
alcoholic beverages.

LABOR COSTS
Labor costs include the cost of all employees necessary to run the business. This expense category
would also include the amount of any taxes you are required to pay when you have employees on your
payroll. Some operators find it helpful to include the cost of management in this category. Others prefer
to place the cost of managers in the category of other expenses. In most operations labor costs are an
operator’s highest cost, or they are second only to food costs in total dollars spent. If management is
included as a labor cost, then this category will frequently be even larger than the food cost category.

OTHER EXPENSES
Other expenses include all expenses that are neither food, nor beverage, nor la bor. Examples include
franchise fees, utilities, rent, linen, and such items as china, glassware, kitchen knives, and pots and
pans. While this expense category is sometimes incorrectly referred to as “minor expenses,” your ability
to success fully control this expense area is especially critical to the overall profitability of your
foodservice unit

Managing Revenue and Expense | [Cost Control] 6

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

FLOW OF COST CONTROL

AREAS OF CONTROL CONTROL MEASURES

Establishing of sales forecast, budget for each cost
Forecasting, budgeting and item, desired profit and other performance
standards setting targets

Distributing responsibilities Identifying and distributing operational tasks and

and defining accountabilities responsibilities; defining accountabilities for
for results results.

Preparation of menus, standardization, costing and

Menu Planning pricing of recipes, test quality and yield.

Use of purchase specification, calculation of

Ordering and Purchasing requirements based on the accurate allocations and par
stock, test for quality and yield; competitive bidding

Inspection of stock against quality standards and

Receiving of Stocks
purchase specifications; use of receiving reports.

Limitation of access, classification of stocks, use of tags

Storage and Inventory and labels, regularly inventory. Reconciliation of actual
vs. expected stock balance

Establishment of par stock requirements. Use of

Requisition and Issuance requisition forms; use of FIFO system (first in; first out).

Use of standard recipe, recycling of left=overs, adherence

Production and Service
to standards serving portions, use of order slips

Audit and Recording of Audit of sales vs. issued portions, recording of daily sales,
Transaction receipts, invoices, purchases, etc.

Monitoring performance vs target, and standards,

Corrective measures analyzing variances, taking corrective action.

The figure shows the sequence of flow of the cost control in the hospitality industry focused of different
areas of control with the standard control measure that the management uses.

Managing Revenue and Expense | [Cost Control] 7

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

GETTING STARTED

Good managers learn to understand, control, and manage their expenses. Consider the case of
Tabreshia Larson, the food and beverage director of the 200-room Renaud Hotel, located in a college
town and built near an interstate highway. Tabreshia has just received her end-of-the-year operating
reports for the current year. She is interested in comparing these results to those of the prior year. The
numbers she received are shown in Figure 1.3

Tabreshia is concerned, but she is not sure if she should be. Revenue is higher than last year, so she feels
her guests must like the products and services they receive. In fact, repeat business from corporate
meetings and special-events meals is really beginning to develop. Profits are greater than last year also,
but Tabreshia has the uneasy feeling that things are not going as well as they could. The kitchen appears
to run smoothly. The staff, however, often runs out of needed items, and there seems to be a large
amount of leftover food thrown away on a regular basis.
Sometimes, there seem to be too many staff members on the property; at other times, guests have to
wait too long to get served. Tabreshia also feels that employee theft may be occurring, but she certainly
doesn’t have the time to watch every storage area within her operation. Tabreshia also senses that the
hotel general manager, who is Tabreshia’s boss, may be less than pleased with her department’s
performance. She would really like to get a handle on the problem (if there is one), but how and where
should she start?
The answer for Tabreshia, and for you, if you want to develop a serious expense control system,
is very simple. You start with basic mathematics skills that you must have to properly analyze your
expenses. The mathematics required, and used in this text, consist only of addition, subtraction,
multiplication, and division. These tools will be sufficient to build a cost control system that will help you
professionally manage the expenses you incur. What would it mean if a fellow foodservice manager told
you that he spent $500 on food yesterday? Obviously, it means little unless you know more about his
operation. Should he have spent $500 yesterday? Was that too much? Too little? Was it a “good” day?
These questions raise a difficult problem. How can you equitably compare your expenses today with
Managing Revenue and Expense | [Cost Control] 8
 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

those of yesterday, or your foodservice unit with another, so that you can see how well you are doing?
We know that the value of dollars has changed over time. A restaurant with revenue of $1,000 per day
in 1954 is very different from the same restaurant with daily revenue of $1,000 today. The value of the
dollar today is quite different from what it was in 1954. Generally, inflation causes the purchasing power
of a dollar today to be less than that of a dollar from a previous time period. While this concept of
changing value is useful in the area of finance, it is vexing when one wants to answer the simple
question, “Am I doing as well today as I was doing five years ago?” Alternatively, consider the problem
of a multiunit manager. Two units sell tacos on either side of a large city. One uses $500 worth of food
products each day; the other unit uses $600 worth of food products each day. Does the second unit use
an additional $100 worth of food each day because it has more guests or because it is less efficient in
utilizing the food? The answer to all of the preceding questions, and many more, can be determined if
we use percentages to relate expenses incurred to revenue generated. Percentage calculations are
important for at least two major reasons. First and foremost, percentages are the most common
standard used for evaluating costs in the foodservice industry. Therefore, knowledge of what a percent
is and how it is calculated is vital. Second, as a manager in the foodservice industry, you will be
evaluated primarily on your ability to compute, analyze, and control these percent figures. While it is
true that many basic management tools such as Microsoft Excel, Lotus, and other software programs
will “compute” percentages for you, it is important that you understand what the percentages mean
and how they should be interpreted. Percent calculations are used extensively in this text and are a
cornerstone of any effective cost control system.

PERCENT REVIEW
Understanding percent’s and how they are mathematically computed is important. The following review
may be helpful for some readers. If you thoroughly understand the percent concept, you may skip this
section and the Computing Percent section and proceed directly to the Using Percent section. Percent
(%) means “out of each hundred.” Thus, 10 percent would mean 10 out of each 100. If we asked how
many guests would buy blueberry pie on a given day, and the answer is 10 percent, then 10 people out
of each 100 we serve will select blueberry pie. If 52 percent of your employees are female, then 52 out
of each 100 employees are female. If 15 percent of your employees will receive a raise this month, then
15 out of 100 employees will get their raise. Figure 1.4 shows three ways to write a percent:

Managing Revenue and Expense | [Cost Control] 9

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

COMMON FORM
In its common form, the % sign is used to express the percentage. If we say 10 per cent, then we mean
“10 out of each 100” and no further explanation is necessary. The common form, the percent, is
equivalent to the same amount expressed in either the fraction or the decimal form.
1. FRACTION FORM
In fraction form, the percent is expressed as the part, or a portion of 100. Thus, 10 percent is written as
10 “over” 100 (10/100). This is simply another way of ex pressing the relationship between the part (10)
and the whole (100).
2. DECIMAL FORM
A decimal is a number developed from the counting system we use. It is based on the fact that we count
to 10 then start over again. In other words, each of our major units, 10s, 100s, 1,000s, and so on, are
based on the use of 10s, and each number can easily be divided by 10. Instead of using the % sign, the
decimal form uses the (.) or decimal point to express the percent relationship. Thus, 10 percent is
ex pressed as 0.10 in decimal form. The numbers to the right of the decimal point ex press the
percentage. Each of these three methods of expressing percentages is used in the foodservice industry,
and to be successful you must develop a clear understanding of how a percentage is computed. Once
that is known, you can express the percentage in any form that is required or that is useful to you.

COMPUTING PERCENT
To determine what percent one number is of another number, divide the number that is the part by the
number that is the whole. Usually, but not always, this means dividing the smaller number by the larger
number. For example, assume that 840 guests were served during a banquet at your hotel; 420 of them
asked for coffee with their meal. To find what percent of your guests ordered coffee, divide the part
(420) by the whole (840). The process looks as follows:

Thus, 50% (common form), 50/100 (fraction form), or 0.50 (decimal form) rep resents the proportion of
people at the banquet who ordered coffee. A large number of new foodservice managers have difficulty
computing percent figures. It is easy to forget which number goes “on the top” and which number goes
“on the bottom.” In general, if you attempt to compute a percentage and get a whole number (a
num ber larger than 1), either a mistake has been made or costs are extremely high! Many people also
become confused when converting from one form of percent to another. If that is a problem, remember
the following conversion rules:
1. To convert from common form to decimal form, move the decimal two places to the left, that
is, 50.00% 0.50.
2. To convert from decimal form to common form, move the decimal two places to the right,
that is, 0.40 40.00%.

Managing Revenue and Expense | [Cost Control] 10

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

USING PERCENT (Computation)

1.Consider a restaurant that you are operating. Imagine that your revenues for a week are in the
amount of $1,600. Expenses for the same week are $1,200. Given these facts and the information
presented earlier in this chapter, your profit formula for the week would look as follows:
FORMULA: ___________________________________
MATHEMATICAL EQUATION: ___________________________________
ANSWER: ___________________________________

2. If you had planned for a $500 profit for the week, you would have been “short.” Using the alternative
profit formula presented earlier, you would find:
FORMULA: ___________________________________
MATHEMATICAL EQUATION: ___________________________________
ANSWER: ___________________________________

3. Note that expense in this example ($1,200) exceeds ideal expense ($1,100) and, thus, too little profit
was achieved. These numbers can also be expressed in terms of percent. If we want to know what
percent of our revenue went to pay for our expenses, we would compute it as follows:
FORMULA: ___________________________________
MATHEMATICAL EQUATION: ___________________________________
ANSWER: ___________________________________

4.Another way to state this relationship is to say that each dollar of revenue costs 75 cents to produce.
Also, each revenue dollar taken in results in 25 cents profit:
FORMULA: ___________________________________
MATHEMATICAL EQUATION: ___________________________________
ANSWER: ___________________________________

5.As long as expense is smaller than S1600 revenue, S400 profit will be generated, even if it is not as
much as you had planned. You can compute profit percent:
FORMULA: ___________________________________
MATHEMATICAL EQUATION: ___________________________________
ANSWER: ___________________________________

Managing Revenue and Expense | [Cost Control] 11

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

UNDERSTANDING THE INCOME (PROFIT AND LOSS) STATEMENT

Consider Figure 1.6, an example from Pat’s Steakhouse. All of Pat’s expenses and profits can be
computed as percents by using the revenue figure, $400,000, as the whole, with expenses and profit
representing the parts as below figure 1.6:

Compute the following: (Show your solution)

1. Food Beverage Cost %

2. Labor Cost %
3. Other Expense %
4. Total Expense %
5. Profit %

Managing Revenue and Expense | [Cost Control] 12

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

An accounting tool that details revenue, expenses, and profit for a given period of time, is called the
income statement, which is commonly called the profit and-loss statement (P&L). It lists revenue, food
and beverage cost, labor cost, and other expense. The P&L also identifies profits since, as you recall,
profits are generated by the formula:

UNDERSTANDING BUDGET

Some foodservice managers do not generate revenue on a daily basis. Consider, for a moment, the
foodservice manager at a summer camp run for children. In this case, parents pay a fixed fee to cover
housing, activities, and meals for a set period of time. The foodservice director, in this situation, is just
one of several managers who must share this revenue. If too many dollars are spent on providing
housing or play activities, too few dollars may be available to provide an adequate quantity or quality of
meals. On the other hand, if too many dollars are spent on pro viding foodservice, there may not be
enough left to cover other needed expense areas. In a case like this, foodservice operators should
prepare a budget. A budget is simply an estimate of projected revenue, expense, and profit. In some
hospitality companies, the budget is known as the plan, referring to the fact that the budget details the
operation’s estimated, or “planned for,” revenue and expense for a given accounting period. An
accounting period is an hour, day, week, or month in which an operator wishes to analyze revenue and
expenses.

Managing Revenue and Expense | [Cost Control] 13

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

This same logic applies to the foodservice operation. Figure 1.10 represents commonly used budget
periods and their accompanying proportion amount. Many foodservice operations are changing from
“one month” budget periods to periods of 28 days. The 28-day-period approach divides a year into 13
equal pe riods of 28 days each. Therefore, each period has four Mondays, four Tuesdays, four
Wednesdays, and so on. This helps the manager compare performance from one period to the next
without having to compensate for “extra days” in any one period. The downside of this approach is that
you can no longer talk about the month of March, for example, because “period 3” would occur during
part of Feb ruary and part of March. Although using the 28-day-period approach takes a while to get
used to, it is an effective way to measure performance and plan from period to period.

Managing Revenue and Expense | [Cost Control] 14

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

ENRICHMENT:

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Managing Revenue and Expense | [Cost Control] 15

 PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

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Managing Revenue and Expense | [Cost Control] 16

PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

Managing Revenue and Expense | [Cost Control] 17

PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

Managing Revenue and Expense | [Cost Control] 18

PAMANTASAN NG LUNGSOD NG MAYNILA
(University of the City of Manila)
General Luna Street corner Muralla Street
Intramuros Manila, Philippines

DEPARTMENT OF HOSPITALITY MANAGEMENT

Managing Revenue and Expense | [Cost Control] 19