6th Sem | Food & Beverage Management | Solved Papers | 2018-19

Q.1. The fixed cost of a pizzeria is Rs.9,00,000/-. The selling price of one pizza is Rs.120/- with the food cost at 50%. From the data provided, apply the formula to determine: (a) Breakeven in units. (b) Breakeven in sales (money) value

To determine the breakeven point of a pizzeria, we need to use the following formula:

Breakeven Point (in units) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)

where Variable Cost per Unit = Food Cost per Unit + Other Variable Costs per Unit

In this case, the fixed cost of the pizzeria is Rs. 9,00,000/-, and the selling price of one pizza is Rs. 120/-. The food cost per unit is 50% of the selling price, or Rs. 60/- per pizza. Let’s assume that the other variable costs per unit are Rs. 30/-.

Using these figures, we can calculate the breakeven point as follows:

(a) Breakeven in units: Breakeven Point = Rs. 9,00,000 / (Rs. 120 – (Rs. 60 + Rs. 30)) Breakeven Point = 9,00,000 / Rs. 30 Breakeven Point = 30,000 pizzas

Therefore, the pizzeria needs to sell 30,000 pizzas to break even.

(b) Breakeven in sales (money) value: Breakeven Sales Value = Breakeven Point (in units) x Selling Price per Unit Breakeven Sales Value = 30,000 x Rs. 120 Breakeven Sales Value = Rs. 36,00,000

Therefore, the pizzeria needs to generate sales of Rs. 36,00,000 to break even.

OR With the help of a neat diagram, explain breakeven analysis.

Breakeven analysis is a tool used to determine the minimum amount of sales needed to cover all costs and expenses, and to determine the level of sales needed to achieve a desired profit. The breakeven point is the point at which total revenue equals total costs, and there is no profit or loss.

The breakeven analysis can be represented graphically by plotting the total revenue and total cost functions on a graph. The point where the two lines intersect is the breakeven point.

Here is an example of how to perform a breakeven analysis:

Assume a company produces and sells a product for Rs. 100 per unit. The fixed costs of producing the product are Rs. 10,000, and the variable costs per unit are Rs. 50. To perform a breakeven analysis, we can use the following formula:

Breakeven Point (in units) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)

Breakeven Point (in units) = Rs. 10,000 / (Rs. 100 – Rs. 50) Breakeven Point (in units) = 200 units

Therefore, the company needs to sell 200 units of the product to break even. Any sales beyond this point will result in profit for the company.

To illustrate this graphically, we can plot the total revenue and total cost functions on a graph, as shown below:

[Diagram to be added]

The breakeven point is the point where the total revenue and total cost lines intersect, which in this case is at 200 units. Beyond this point, the total revenue line will be higher than the total cost line, indicating that the company is making a profit.

In conclusion, breakeven analysis is a powerful tool that can help businesses determine the minimum sales required to cover all costs and expenses, and to identify the level of sales needed to achieve a desired profit. It can be represented graphically by plotting the total revenue and total cost functions on a graph.

Q.2. What are the menu merchandising tactics engaged in restaurants that help in promoting sales of dishes?

Menu merchandising refers to the various tactics and techniques used by restaurants to promote the sales of their dishes. Here are some of the menu merchandising tactics that can be employed to increase sales:

1. Menu Layout: The layout and design of the menu can have a significant impact on the sales of dishes. For example, highlighting popular dishes or placing high-profit items in prominent positions can help to increase sales.
2. Descriptive Language: Using descriptive language to describe dishes can make them more appealing and increase the likelihood of customers ordering them. For example, describing a dish as “succulent” or “mouth-watering” can make it more enticing to customers.
3. Photos and Graphics: Including photos and graphics of dishes on the menu can help customers visualize the dish and increase their desire to order it. This is especially effective for visually appealing dishes such as desserts or cocktails.
4. Menu Engineering: Menu engineering involves analyzing the profitability of dishes and adjusting prices or portion sizes to maximize profits. For example, increasing the price of high-profit items or reducing portion sizes of low-profit items can help to increase overall profits.
5. Limited-Time Offers: Offering limited-time menu items or seasonal specials can create a sense of urgency and encourage customers to try new dishes. This can also help to create a sense of excitement and anticipation among customers.
6. Upselling: Encouraging customers to order additional items or upgrades, such as adding a side dish or upgrading to a larger size, can help to increase sales and overall revenue.
7. Signature Dishes: Creating signature dishes that are unique to the restaurant can help to differentiate it from competitors and create a sense of brand identity. This can also help to build customer loyalty and encourage repeat visits.

OR Discuss the methods of pricing of menus followed by restaurants.

Q.3. Sales can be expressed in different ways to get a better evaluation of service. Throw light on the various sales concepts.

OR (a) Discuss the elements of cost.

The elements of cost refer to the various costs incurred by a business in the process of producing goods or providing services. Here are the common elements of cost:

1. Material Cost: This includes the cost of raw materials, components, and supplies used in the production process.
2. Labor Cost: This includes the cost of wages, salaries, and benefits paid to employees involved in the production process.
3. Overhead Cost: This includes all indirect costs that are not directly tied to the production process, such as rent, utilities, insurance, and office supplies.
4. Selling and Distribution Cost: This includes the cost of marketing and promoting the product, as well as the cost of distribution, such as transportation, packaging, and handling.
5. Administrative Cost: This includes the cost of running the administrative and management functions of the business, such as salaries of executives, accounting, legal, and human resources.
6. Research and Development Cost: This includes the cost of research and development activities undertaken to improve or create new products or services.
7. Depreciation Cost: This includes the gradual decrease in value of long-term assets such as equipment, buildings, and vehicles over their useful life.
8. Finance Cost: This includes the cost of financing the business operations such as interest paid on loans, lines of credit, and other financial expenses.

(b) Classify costs based on behavioural dynamics.

Costs can be classified based on their behavioral dynamics, which refers to how costs change in response to changes in the level of activity or output. Here are the common classifications of costs based on behavioral dynamics:

1. Fixed Costs: These are costs that do not vary with changes in the level of activity or output. Examples of fixed costs include rent, salaries of permanent employees, and insurance premiums.
2. Variable Costs: These are costs that vary with changes in the level of activity or output. Examples of variable costs include direct materials, direct labor, and sales commissions.
3. Semi-Variable Costs: These are costs that have both fixed and variable components. Examples of semi-variable costs include utilities, phone bills, and maintenance costs.
4. Step Costs: These are costs that remain fixed over a certain range of activity or output, but increase abruptly in steps as activity or output increases beyond that range. Examples of step costs include hiring additional employees or purchasing additional equipment.
5. Mixed Costs: These are costs that have both fixed and variable components, but the fixed and variable components cannot be easily separated. Examples of mixed costs include utility bills that have a fixed monthly charge plus a variable charge based on usage.

Understanding the behavioral dynamics of costs is important for businesses to make informed decisions about pricing, production, and profitability. By analyzing the various cost classifications, businesses can identify areas where costs can be reduced or managed more effectively, and make informed decisions to optimize their operations and increase profits.

Q.4. Provide details on zero budgeting, highlighting the merits and demerits.

Zero-based budgeting (ZBB) is a budgeting technique that involves preparing a budget from scratch, starting with zero and justifying every expense. Here are the merits and demerits of zero-based budgeting:

Merits:

1. Cost Reduction: ZBB can lead to cost reductions by identifying unnecessary expenses and reallocating resources to more productive areas.
2. Efficiency: By starting with a clean slate and requiring justification for every expense, ZBB encourages greater efficiency and accountability in the budgeting process.
3. Resource Optimization: ZBB can help businesses to allocate resources to the most productive areas and prioritize spending based on the needs of the business.
4. Improved Decision Making: ZBB encourages managers to carefully evaluate and prioritize expenses, which can lead to better decision-making and a more strategic approach to resource allocation.
5. Flexibility: ZBB is more flexible than traditional budgeting methods, as it can be easily adjusted to reflect changes in business needs and priorities.

Demerits:

1. Time-Consuming: ZBB can be a time-consuming process, requiring extensive planning and analysis to justify every expense.
2. Resource Intensive: ZBB requires significant resources, including time, money, and personnel, to implement effectively.
3. Difficulty in Implementation: ZBB can be difficult to implement in large organizations with complex operations, as it requires extensive coordination and buy-in from multiple departments and stakeholders.
4. Risk Aversion: ZBB may discourage managers from taking risks or investing in new initiatives, as they may be hesitant to justify the associated expenses.
5. Limited Scope: ZBB may be more effective for certain areas of the business, such as operational expenses, but may not be as effective for capital expenditures or strategic investments.

Q.5. Explain menu engineering with a neat pictographic presentation.

Here is a pictographic presentation of menu engineering:

[Diagram to be added]

As shown in the image, menu engineering involves analyzing menu items based on two factors: popularity and profitability. Each menu item is plotted on a graph with these two axes, creating four quadrants:

1. Stars: These menu items are both popular and profitable. They are the top performers on the menu and should be highlighted and priced accordingly.
2. Plowhorses: These menu items are popular but not very profitable. They are the workhorses of the menu and can be adjusted to improve profitability, such as by reducing portion sizes or increasing prices.
3. Puzzles: These menu items are not very popular but highly profitable. They are the hidden gems on the menu and can be promoted to increase their popularity, such as through specials or improved menu placement.
4. Dogs: These menu items are neither popular nor profitable. They are underperformers on the menu and can be removed or redesigned to improve their appeal and profitability.

By using menu engineering, restaurants can optimize their menu offerings to maximize profitability and improve the overall dining experience for their customers.

Q.6. Elaborate on any five possible fraudulent practices in bar by the bartender.

It is important for establishments to implement proper training and controls to prevent fraudulent practices by bartenders and other staff members. This includes strict inventory controls, regular audits, monitoring of point of sale systems, and strict policies and procedures for serving alcohol and handling cash transactions.

Here are five possible fraudulent practices that a bartender may engage in:

1. Overpouring: This is the practice of intentionally pouring more alcohol into a drink than necessary in order to increase sales and profits. Bartenders may also overpour for personal gain, such as receiving larger tips from customers who believe they are getting a stronger drink.
2. Short Pouring: This is the practice of intentionally pouring less alcohol into a drink than necessary in order to save costs or increase profits. This is a deceptive practice that can harm the reputation of the establishment and lead to dissatisfied customers.
3. Overcharging: This is the practice of charging customers more than the actual price of a drink or item on the menu. This can occur through the manipulation of the point of sale system or through misleading pricing tactics.
4. Stealing: This is the practice of taking money or items from the establishment without permission or authorization. This can occur through the manipulation of cash registers, the theft of inventory, or the unauthorized use of credit cards.
5. Serving Underage Customers: This is the practice of serving alcohol to underage customers, which is illegal and can result in fines, legal action, and damage to the reputation of the establishment.

Q.7. Discuss the methods of purchasing beverages.

Beverage purchasing is a critical component of the beverage service industry, as it ensures that the establishment has the necessary inventory to meet customer demand. Here are some common methods of purchasing beverages:

1. Direct Purchasing: This involves purchasing beverages directly from the manufacturer or distributor. This method often results in lower costs and greater control over inventory, as the establishment can negotiate directly with the supplier and track inventory levels more closely.
2. Group Purchasing: This involves joining a group purchasing organization or consortium that negotiates purchasing agreements with manufacturers and distributors on behalf of its members. This method often results in lower costs and greater purchasing power, as the group can negotiate better pricing and terms than individual establishments.
3. Wholesale Purchasing: This involves purchasing beverages from a wholesaler, who buys in bulk from manufacturers and distributors and then sells to retailers and establishments. This method can be convenient and cost-effective, but may result in higher costs and less control over inventory.
4. Online Purchasing: This involves purchasing beverages through online retailers or distributors. This method can be convenient and may offer a wider selection of products, but may result in higher costs and shipping fees.
5. Consignment Purchasing: This involves purchasing beverages on consignment, meaning that the establishment only pays for the products sold to customers. This method can be beneficial for establishments with limited cash flow or uncertain demand, but may result in higher costs per unit.

Regardless of the purchasing method, it is important for establishments to conduct thorough research and analysis to determine the best sources and prices for their beverage inventory. This includes evaluating the reputation and reliability of suppliers, negotiating favorable pricing and terms, and implementing strict inventory controls to prevent waste and theft.

Q.8. Discuss the two methods of inventory control. What are the objectives of inventory control?

There are two main methods of inventory control: manual and automated.

1. Manual Inventory Control: This involves tracking inventory levels manually using spreadsheets, ledgers, or other paper-based systems. This method is often used by smaller establishments with limited inventory or resources. Manual inventory control can be time-consuming and prone to errors, but it can also be cost-effective and allow for greater control over inventory levels.
2. Automated Inventory Control: This involves using software and technology to track inventory levels, such as through bar code scanning, RFID tags, or point of sale systems. This method is often used by larger establishments with more complex inventory needs. Automated inventory control can be more efficient and accurate than manual methods, but it can also be more expensive and require greater technical expertise.

The objectives of inventory control include:

1. Minimizing Costs: By maintaining optimal inventory levels and reducing waste and spoilage, inventory control can help minimize costs and maximize profits.
2. Ensuring Adequate Supply: By monitoring inventory levels and anticipating demand, inventory control can help ensure that the establishment has the necessary inventory to meet customer demand.
3. Improving Efficiency: By streamlining inventory management and reducing manual processes, inventory control can help improve efficiency and productivity.
4. Preventing Theft and Fraud: By implementing strict controls and monitoring inventory levels, inventory control can help prevent theft and fraud by employees or customers.
5. Enhancing Customer Satisfaction: By ensuring that the establishment has the necessary inventory to meet customer demand, inventory control can help enhance customer satisfaction and loyalty.

Q.9. Write short notes (any two):

(a) Labour variance (b) M.I.S (c) P.O.S (d) Blind receiving

(a) Labour Variance: This refers to the difference between the actual cost of labour and the budgeted cost of labour. It is a measure of how efficiently labour is being used in an establishment. Positive labour variance occurs when the actual cost of labour is less than the budgeted cost, while negative labour variance occurs when the actual cost of labour is greater than the budgeted cost.

(b) M.I.S: M.I.S stands for Management Information System. It is a computer-based system used by businesses to manage and analyze data related to their operations. M.I.S can help businesses track inventory, sales, costs, and other important data, allowing them to make informed decisions and improve their operations.

(c) P.O.S: P.O.S stands for Point of Sale. It is a computerized system used by businesses to process sales transactions and track inventory. P.O.S systems can also provide businesses with important data such as sales trends, inventory levels, and customer preferences, allowing them to make informed decisions and improve their operations.

(d) Blind Receiving: Blind receiving is a method of receiving inventory where the receiver does not know the quantity or type of inventory being delivered. This method is used to prevent theft and fraud by ensuring that the receiver cannot alter the inventory count or value. Blind receiving can be performed using a variety of methods, such as numbering packages or using sealed containers.

Q.10. Match the best pair:

(i) Sizzlers (a) Perpetual inventory
(ii) Bin card (b) Budgetary control
(iii) Cocktails (c) Sales promotion
(iv) Happy hour (d) Snowball effect
(v) Semi variable costs (e) Credit memo
(vi) Angle of incidence (f) Pour brands
(vii) Low profit, high popularity (g) Cash cows
(viii)High profit, low popularity (h) Breakeven
(ix) Broken wine, bottle delivery (i) Step costs
(x) Cumulative food cost report (j) Puzzles