HTM 2030 Lecture Notes - Lecture 13: Menu Cost, Contribution Margin

• School: University of Guelph
• Department: Hospitality and Tourism Management
• Course: HTM 2030
• Professor: William Murray

Document Summary

Chapter 11 (cid:862)we take dollars, (cid:374)ot per(cid:272)e(cid:374)tages, to the (cid:271)a(cid:374)k (cid:863) Cost controls are extremely important: maintaining reasonable food cost % is critical, however, contribution margins in absolute terms are what allows an operation to earn profit. Preferences: selling items with high contribution margins, selling items that are popular. The evaluation of every item on a menu relative to: profitability contribution margin ($, popularity menu mix. Ca(cid:374)(cid:859)t (cid:272)o(cid:373)pare different categories with each other i. e. dessert with appetizer. Contribution margin (cm) = sales price food cost. Menu cost = food cost x numbers sold. Total sales = price x number sold. Menu cm = cm x number sold. Average food cost % = total menu cost/ total sales. Contribution margin category: compares contribution margin for each menu item with the average contribution margin for the menu. Low = item has a cm below menu average. High = item has a cm above menu average.