Skip main navigation

Basic Elements of Costs

The chef or business owner is responsible to ensure that expenses are met by income, irrespective of whether the operation is a profit orientated food
The chef or business owner is responsible to ensure that expenses are met by income, irrespective of whether the operation is a profit orientated foodservice unit or not. Several elements are used in the overall cost base.

Costs

A cost is an expense incurred for goods or services when the goods are consumed, or the services rendered. There are various types of costs:

Fixed Costs:

  • Are those that are NORMALLY unaffected by changes in sales volume. For example, insurance premiums, real estate taxes and depreciation on equipment.
  • Other: repairs & maintenance, rent or occupancy costs, most utility costs, and the costs of professional services such as accountants (agency fees).

Variable Costs:

  • Are those that are clearly related to business volume.
  • As business volume increase, variable costs will increase or vice versa.
  • Food costs are considerate directly variable costs. Directly variable costs are those that are linked to business volume.

Controllable Costs:

  • Controllable costs are those that can be changed in the short term.
  • Variable costs are normally controllable.
  • Cost of food or beverage can be changed.

Non-controllable Costs:

  • That cannot be changed in short term.
  • They are usually fixed costs.
  • Examples include rent, interest on a mortgage, real estate taxes and licence fees.

Activity

If you had a food cost is 36%, your labour cost 25%, overheads 22%, how much is your net profit?

Click here for the answer

© International Culinary Studio
This article is from the free online

How to Manage Food Costing in the Catering and Restaurant Industry

Created by
FutureLearn - Learning For Life

Reach your personal and professional goals

Unlock access to hundreds of expert online courses and degrees from top universities and educators to gain accredited qualifications and professional CV-building certificates.

Join over 18 million learners to launch, switch or build upon your career, all at your own pace, across a wide range of topic areas.

Start Learning now