Costing is ascertaining the amount suitable for an item or thing. It can also be defined as the analysis and allocation of expenditure for the purpose of determining the cost of each service.
ADVANTAGES OF AN EFFICIENT COSTING IN CATERING
- It gives a glance of the net profit made by each section of the establishment.
- It shows the cost of each meal produced.
- The source of the economy will be revealed.
- Costing provides information which is necessary for the formation or adoption of a sound pricing policy.
- It enables the caterer or hotel to keep to a budget.
- It helps show the analysis of income and expenditure.
- It provides quotation for special functions like parties, weddings, reception,banquet.
- Define costing in terms of control in catering.
- List and explain 5 advantages of an efficient costing in catering.
ELEMENTS OF COSTING
- MATERIAL COST: – This is the cost of materials used in producing the food sold, consumed by workers or wasted. Basically, it is not all the foods produced in the hotels and restaurant that are sold; some are consumed by workers, some wasted and some sold, the material or food cost includes the cost of raw materials used in producing the food.
- LABOUR COST: – As a matter of fact big hotels and restaurants employ staffs and pay salaries, while some small restaurant hire workers to work for hours or days and pay them. Labour cost includes all the money used in paying wages and salaries to the staff within the catering establishment.
- EXPENSES/OVERHEAD COST: – Under expenses the following as to be considered. Such as fixed cost, variable cost, semi variable cost, total cost.
- Fixed cost: – is a constant within a range of production of goods and services, e.g. rentage, depreciation, salaries, insurance and rates. Fixed cost are expenses incurred depending on the level of production.
- Variable cost: – These are cost that varies directly with the level of production. The higher the level of production, the more the cost will be. Example of variable cost includes food cost, labour cost etc. The higher the demand for food, the higher there is any increase in the quantity bought, the higher the money involved in its purchase.
iii. Semi-variable cost:-These are cost that neither falls into fixed cost nor variables cost but they do have the element of both
- Total cost: – This consists of all the cost incurred in the catering establishment that is, the cost incurred in the kitchen, restaurants, room, bar, lounge, etc. It includes food cost, beverage cost, labour cost, and over head cost.
Total cost = total fixed cost + total variable cost + total semi variable cost.
- List three elements of costing.
- Write short notes on fixed cost, variable cost, semi-variable cost, total cost.
The hotelier produces dishes for sale, and in order to know how to charge the customers, the cost of the material most be ascertained. The food cost must be marked up by the hotelier so as to know what the customer will eventually pay.
GUIDELINES FOR COSTING DISHES
- There should be a manual consisting of dishes and their recipes showing the ingredients and quantity.
- The yield or the number of portions that can be obtained from a dish should be specified in a recipe.
- The unit prices vary from time to time depending on the season of the year.
- Once the recipe for the product and the price of the ingredient is known, the cost of each ingredient used should be calculated by multiplying the unit price by the quantity used; In order to calculate the total cost of the ingredient used, the cost of all the ingredients are summed up accordingly.
- It is necessary to know the cost of the portion of the dish produced, this is done by dividing the hotel cost with the number of portion yield.
- In order to know the charge on the portion of the dish, the dish per portion is marked up
by the amount (gross profit) that will cover the labour and overhead and still provide a reasonable amount for net profit. For instance, if the cost per portion is X, and the margin is 60% .It simply implies that cost percentage will be;
100 – 60 = 40
X x 100
40 x 1
Costing sheet is used for costing dishes.
|4 LITRES||WHITE SAUCE||8.00||32.00|
|CHARGE PER PORTION||9.00|
To calculate the selling price, exclusive of the value added tax, if the required gross profit is to be 60%.
Selling price = food cost x100
S.P = 3.60 X 100 = 9.00
Where F.C = FOODCOST;
S.P = SELLING PRICE
Gross profit: – the production of sale added to food cost so as to cover the labour cost, overhead cost and the profit. Another name for gross profit is kitchen profit.
The gross profit = labour cost + overhead cost + net profit.
Gross profit = sales – food cost.
TERMS USED WITH GROSS PROFIT.
Mark: – this is a term used when gross profit Is expressed as a percentage of the sales; margin may vary at times, where food cost may be cheap enough that it can be heavily marked up.
EXAMPLE: The sale of a dish is #2000.00; the food cost is #800.00.What is the margin?
Gross profit = sales – food cost
Gross profit= #2000.00 – #800.00 = #1200.00
Margin = gross profit X 100
= 1200 X 100
Mark up: This is the amount added to food cost to get the selling price. This amount is the gross profit, when the amount is expressed as a percentage of food cost, it is known as the mark up.
Mark up = gross profit X 100
Food cost 1
Give the formular for the following parameters.
(1) Gross profit (2) margin (c) mark up.
GENERAL EVALUATION QUESTIONS
- What is costing?
- Explain dish costing.
- Describe the service of champagne.
- List 5 items that can be used to garnish cocktail drinks.
- Mention 5 napkin folds.
READING ASSIGNMENT: Catering Craft for SS3 by S.N Bariki page 61-70.
WEEKEND ASSIGNMENT(SECTION A)
- _____Is used to ascertain the amount suitable for an item /thing. A. food cost B expenses C. labour D. costing.
- An advantage of costing is? A. it shows the analysis of data B. it shows the analysis of income and expenditure C. it shows the analysis of report D. all of the above.
- The cost of material used in producing the food is called___. A. food cost B. labour C. wages D. all of the above
- There are ___ elements of costing. A. 8 B. 4 C. 3 D. 2
- Food cost, labour cost, cost of fuel are examples of____ type of cost. A fixed cost B. variable cost C. total cost D. none of the above.
- What is costing? (b) Give two examples of costing.
- Write short notes on the following (a) fixed cost (b) variable.
- costing definition
- costing methods
- costing meaning
- costing synonym
- costing systems
- costing methods in accounting
- costing sheet
- costing model
- costing inventory methods