Chapter 16

Monitoring Beverage Operations

Principles of Food, Beverage, and Labour Cost Controls,Canadian Edition

Learning ObjectivesAfter reading this chapter, you should be able to:• 16.1 Identify the three general approaches to monitoring beverage operations.• 16.2 Calculate monthly amounts for the cost of beverages sold, for wines, spirits, and

beers separately.• 16.3 Calculate the value of liquor issued to a bar, bar inventory differential, and cost of

liquor consumed.• 16.4 List possible reasons for differences between actual and standard beverage

costs.• 16.5 Calculate daily amounts for the cost of beverages sold, beverage cost

percentages, and cost percentages for wines, spirits, and beers separately.• 16.6 Determine standard beverage cost for a given period.• 16.7 Calculate potential sales value per bottle for beverages sold by the straight drink.• 16.8 Determine a mixed drink differential and use it to adjust potential sales values.• 16.9 Calculate potential sales values using the actual sales record method and the

average sales value method.• 16.10 Identify the formulas used to calculate beverage inventory turnover and explain

how the results of this calculation can be interpreted for maintaining appropriate inventory levels of spirits and beers.

Monitoring Beverage Operations

• Cost:

• determine the cost of beverages sold compare with either actual cost or standard cost

• Liquid measure:

• compare the number of ounces sold with the number of ounces consumed

• Sales values:

• compare the potential sales value of beverages consumed with the actual revenue recorded

Monitoring Beverage Operations

The Cost Approach• Monthly calculations

• Using cost per dollar sale• Inventory and F & B transfers

• Cost calculations by category• Spirits• Wine• Beer (draught, import, domestic)

• Daily calculations• Cumulative “to date”

• Compare results to Standard and Actual Costs

Monitoring Beverage Operations

• The Liquid Measure Approach• Ounce-control method• Daily inventory and determine ounces sold• Manually is labour intensive• Automated is effective

The Sales Value Approach

Determine potential sales value per bottle compared to revenue, can be complex.

1. Actual sales record method

• Mixed drink differential

2. Average sales value method

• Use values from a sample period

• Allow for some variance from actual

3. Standard deviation method

• An acceptable range is established

Potential Sales Values 1. Determine bottle size and drink size.2. Calculate drinks per bottle.3. Multiply drinks per bottle by drink price to get sales

value per bottle.

ExampleBottle size: 1 litre; Drink size: 1 ounce33.8 drinks per bottle33.8 × $3.00 = $101.40

Cost Percent Formulas

Opening beverage inventory+ Beverage purchases this month= Total available for sale this month– Closing inventory this month = Value of beverages issued to the bar

Bar inventory value at the beginning of the month– Bar inventory value at the end of the month= Bar inventory differential

Cost Percent Formulas

Value of beverages issued to the bar+/– Inventory differential= Cost of beverages consumed (beverage cost) 

Beverage cost percentage = Beverage costBeverage sales

Adjustments to Beverage Cost • These are added to beverage cost

• Transfers from kitchen to bar

• Food directs (not transfers)

• Storeroom issues

• Mixers

• These are subtracted from beverage cost

• Managers’ drinks

• Special promotions

Inventory Turnover• To measure how often the inventory has been consumed

and replenished during an accounting period:

Average inventory

=Opening inventory + Closing inventory

2

Inventory turnover =Cost of beverage sold

Average inventory

Generally accepted turnover rates:Spirits—1.5Beers—2.0

Key Terms• Actual sales record method, p. 428• Average sales value method, p. 430• Beverage cost percent, p. 415• Cost per dollar of sale, p. 412• Cost percents, p. 413• Food and beverage transfers, p. 415• Inventory differential, p. 414• Mixed drink differential, p. 428• Ounce-control method, p. 426• Potential sales value, p. 426• Standard cost method, p. 424• Turnover rate, p. 435

Chapter Web Links• Accubar:

www.accubar.com/Products/banquet-inventory.asp• BarVision: www.barvision.com/index.html• Liquid Control Solutions:

www.liquidcontrolsolutions.com/az200-controller.htm• Alcohol Controls: www.alcoholcontrols.com/liclinso.html

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