Cost control: food cost, labour cost and the control points
Cost control keeps costs within planned standards without lowering quality, at every step from purchasing to service; food cost % and labour cost % show whether it is working.
The cost control cycle
- back to Set standards
Standards include standardised recipes, portion sizes, purchase specifications, staffing levels, a target food cost percentage and the budget.
Control points in the food cost cycle
| Stage | How to control cost |
|---|---|
| Purchasing | Written specifications; compare quotations; buy the right quantity at the right time; avoid overbuying perishables |
| Receiving | Check weight, count and quality against the order and bill; reject short or spoiled goods |
| Storing | Right temperature; FIFO; locked stores; stock records and bin cards |
| Issuing | Issue only against signed requisitions; issue oldest stock first |
| Preparation | Standardised recipes; yield tests; careful trimming; forecast numbers to avoid overproduction |
| Portioning and service | Standard ladles, scoops, spoons and plates; plate every dish the same way |
| Sales and cash | Bill every plate; match kitchen orders with bills; daily cash summary |
| Leftovers and waste | Record leftovers and plate waste; use surplus safely; adjust forecasts |
Controlling labour and overhead costs
- Schedule staff to the meal count: more hands at peaks, fewer in slack hours; use part-time help for banquets.
- Staffing standards: meals served per labour hour.
- Training so fewer workers do more, with less waste and breakage.
- Control overtime and absenteeism.
- Labour-saving equipment where volume justifies it (wet grinder, vegetable cutter, dishwasher).
- Energy: switch off idle burners and lights, use pressure cookers and lids, maintain burners and refrigerator seals.
- Preventive maintenance and water saving cut repairs and bills.
Food cost % and labour cost % from a monthly statement
A restaurant's monthly figures: opening food stock ₹40,000; food purchases ₹1,80,000; closing food stock ₹30,000; staff meals ₹10,000; food sales ₹4,50,000; wages and salaries ₹1,02,500; overheads ₹90,000. Find the food cost %, labour cost % and net profit %.
- Food consumed = 40,000 + 1,80,000 − 30,000 = ₹1,90,000
- Cost of food sold = 1,90,000 − 10,000 (staff meals, counted as labour) = ₹1,80,000
- Food cost % = 1,80,000 ÷ 4,50,000 × 100 = 40%
- Labour cost = wages 1,02,500 + staff meals 10,000 = ₹1,12,500; labour cost % = 1,12,500 ÷ 4,50,000 × 100 = 25%
- Overheads % = 90,000 ÷ 4,50,000 × 100 = 20%
- Net profit = 4,50,000 − 1,80,000 − 1,12,500 − 90,000 = ₹67,500 = 15% of sales
Food cost 40%, labour cost 25%, overheads 20%, net profit 15% (40 + 25 + 20 + 15 = 100).
Valuing issues and closing stock by FIFO
Rice: opening stock on 1 June is 100 kg at ₹50/kg. On 10 June 200 kg are bought at ₹55/kg. On 20 June 220 kg are issued to the kitchen. Using FIFO, find the cost of rice issued and the value of closing stock.
- Issue the oldest stock first: 100 kg × ₹50 = ₹5,000
- Remaining 120 kg from the new lot: 120 × ₹55 = ₹6,600
- Cost of rice issued = 5,000 + 6,600 = ₹11,600
- Closing stock = 300 − 220 = 80 kg, all from the new lot: 80 × ₹55 = ₹4,400
- Check: total value 5,000 + (200 × 55 = 11,000) = ₹16,000; 16,000 − 11,600 = ₹4,400
Rice issued costs ₹11,600; closing stock (80 kg) is worth ₹4,400.
Cost control is not cutting the dal: a standard ladle stops one student getting double and another half, and FIFO stops old stock going stale. Good control protects both the budget and every plate's nutrients.
2 marks: “How is food cost percentage calculated?” Food cost percentage = cost of food sold ÷ food sales × 100, where food consumed = opening stock + purchases − closing stock.
5 marks: “Opening stock ₹20,000, purchases ₹80,000, closing stock ₹10,000, food sales ₹2,25,000. Find the food cost percentage.” Food consumed = 20,000 + 80,000 − 10,000 = ₹90,000; food cost % = 90,000 ÷ 2,25,000 × 100 = 40%.
10 marks: “Explain cost control in a food service establishment.” Define; draw the control cycle; control points from purchasing to leftovers; labour and overhead control; food cost % and labour cost % with a worked example; conclude.
Control points: P-R-S-I-P-P-S-W = Purchase, Receive, Store, Issue, Prepare, Portion, Sell, Waste.