COST AND SALES

CONCEPT
AHMAD SAYUTI BIN YAHYA
MANAGEMENT & SCIENCE UNIVERSITY
LEARNING OBJECTIVES:
• Define the terms cost and sales
• Explain and provide an example of following types of costs
• Fixed cost
• Variable
• Semi-variable
• Controllable
• Non controllable
• Unit, total, prime historical and planned cost
• Describe the difference between monetary and non-monetary sales concept
 1.0 Definition of cost
From accounting perspectives:
Reduction in the value of an asset for the purpose
of securing benefits or gain.

From cost control perspectives:

Expenses to a hotel or restaurant for any product
(goods and services) when the goods are consumed
the services are rendered.
Cost associated to F&B business
Food Cost
Cost associated with actually producing the menu items. (e.g. Raw Materials- Vege, fruits, meat)

Beverage cost
Cost associated with producing drinks. Include the cost of ingredients necessary to produce these drinks such
as cherries, lemons, olives, limes etc.

Labour cost
Cost of all employees necessary to run business. (e.g. Salary & Wages, Employee benefits, taxes, etc)

Overhead Cost
All expenses other than Food Cost, Beverage cost and labour cost. Can be considered as cost that are indirectly
involved to the main operation of the business. (e.g. utilities, rent, linen, promotion)
2.0 Types of cost
2.1 FIXED COST AND VARIABLE COST
2.1.1 Fixed Cost
Cost that are normally unaffected by changes in Sales volume. No matter sales are high or low,
this kind of cost normally fixed in certain amount. Fixed sales have little direct relationships to
business volume.
E.g. Insurance, depreciation, marketing, epf & socso.
2.1.2 Variable Cost
Cost that are directly related to sales volume. As sales volume increases, variable cost will
increase. As sales volume decreases, variable cost will decrease too. Variable cost have direct
relationship to business volume.
E.g. Food cost, Beverage cost, Labour Cost.
2.0 Types of cost
2.2 CONTROLLABLE AND NON-CONTROLLABLE COSTS
2.1.1 Controllable Cost
- Cost that can be changed in short term. Variable costs are normally controllable.
- This cost can be controlled as the authority to adjust the cost are in the owner’s hand.
- Cost of food and beverage can be changed in several ways - changing portion size or quality of
ingredients.
E.g. Food Cost, Beverage Cost, Labour Cost (Part time, Overtime), Marketing.
2.1.2 Non Controllable Cost
- Cost that cannot be change in short term. Fixed costs are normally non controllable
- The authority to control the cost are not in owner’s hand. For example, rental charge is under
control of landlord. We cant simply adjust the rental without agreement of landlor.
E.g. Rent, taxes, license fee, depreciation, insurance.
2.0 Types of cost
2.3 HISTORICAL AND PLANNED COST
All cost are historical – They can be found in business records (Book of account/ financial
statement/ financial statement, invoices, employee time cards.)

Historical cost used to establish unit costs, determine menu prices and comparing present with
past labor costs.

Historical costs are particularly helpful in assisting for future planning.

3.0 Sales Concept
Sales: Revenue resulting from the exchange of products and services for value.
Can be divided into “Monetary term” and “Non- Monetary term”

MONETARY TERM NON-MONETARY TERM

• Sales price • Total number sold
• Total Sales • Covers
• Total Sales by category
• Total covers
• Total Sales per server
• Total sales per seat • Average covers
• Average Sales • Seat turnover
• Average sales per customer • Sales Mix
• Average sales per server
3.0 Sales Concept
3.1 MONETARY TERMS
Monetary term of sales referring to the sales that are measured in monetary ways (RM/ USD/ JPY/ CNY).
3.1.1 Sales Price
Refers to amount charged to customer for one unit of particular item. The unit may be single item item
(e.g. an appetizer) or an entire meal, depend on the manner in which restaurant prices its products. E.g. 1
unit of noodle is RM5.00 per bowl.

3.1.2. Total Sales

Refers to the total volume of sales expressed in dollar terms. This may be for any given time of period such
as a week, a month, or a year. E.g. Total Sales for Sahib Café was expressed as RM900,000 for the year
ending December 31, 2019.
Total Sales can be categorized according to category, server, and per seat.
3.0 Sales Concept
3.1.2.1 Total Sales by Category: Total Ringgit sales which categorized according to the type of item sold or period of
business.
e.g. Total Sales by period of time, example:
Breakfast Lunch Dinner
Monday RM2919.90 RM1500.50 RM4312.70

Total Sales by type of items, example:

Pastry Item Hot Item Drink
Monday RM2712.50 RM3250.50 RM1600.00

3.1.2.2 Total Sales per server: Total Ringgit Sales for a given time as according to the number of server.

Total Sales per server = Total Sales ÷ Number of server

3.1.2.3 Total Sales per seat: Total Ringgit Sales for a given time as according to the number of seats.

Total Sales per seat = Total Sales ÷ Number of seat

3.0 Sales Concept
3.1.3 Average Sale
Average sale normally accounted into Average Sales per Customer or Average Sales per Server.
3.1.3.1 Average Sales per Customer- Result of dividing Ringgit Sales by the number of customer.
Usually used to forecast the average spending of customer on one particular restaurant.

Average Sales per customer = Total Ringgit Sales ÷ Total Number of customer

3.1.3.2 Average Sales per Server= Total ringgit Sales for individual server om average. Normally
used to measure the performance of server as according to their average sales.
Average Sales per server = Total Ringgit Sales ÷ Total Number of server
3.0 Sales Concept
3.1 NON-MONETARY TERMS
3.1.1 Total Number Sold
Refer to total number of any menu items sold in a given period of time. (e.g. 1500 units of burger
sold during lunch hour)
3.1.2 Covers
Term used to describe one diner regardless of the quantity of food she/he consumed.
3.1.3 Total Covers
Refers to the total number of customers served in given period of time. Usually used by manager to
read trend in comparison of 2 similar period.
3.1.4 Average Covers
An average number of covers divide by total number of covers for a given of time (e.g. Covers per hour/ covers
per day/ Covers per server)
3.1.5 Seat Turnover
Also known as turns or turnover. Refers to number of sears occupied during a given period of time.
3.1.6 Sales Mix
A relative quantity sold of any menu item as compared with other items in the same category.
3.0 Sales Concept
3.1 NON-MONETARY TERMS
3.1.4 Average Covers
Covers per hour = Total covers / Number of hours of operation
Covers per day = Total covers/ Number of days of operation
Covers per server = Total covers / Number of servers
3.1.5 Seat Turnover
Refer to the number of seats occupied during a given period of time.
Seat Turnover = Total number of covers (customers)/ Total number of seats
3.1.6 Sales Mix
Term used to describe the quantity of item sold in percentage form.

Menu Item Dishes Sold Sales Mix

Lontong 2,320 39.41%
Nasi Goreng 1,345 22.84%
Roti Canai 2,212 37.57%
Total Dishes Sold 5,887 100%
4.0 Cost of Sales Ratio: The Cost Percentage

Cost percentage (%) = (Cost / Sales) x 100

Sales = Cost / Cost %

Cost = Cost % x Sales

THANK YOU!