Accounting
Accounting
Accounting
Costing and Cost Sheet: Analysing the Cost at Gopal Catering Services
Student Name
Institution Affiliation
Date of Submission
COSTING AND COST SHEET 2
Executive Summary
Managers are responsible for ensuring smooth running of businesses from the production
to marketing and selling. While keeping track of the performance of internal resources, the
management has to analyse the external environment along with the demand patterns of the
target consumers to form realistic projections and plan the future. Obtaining food cost calculation
for instance, can enable hotels, restaurants, and catering businesses like GCS to design clear
objectives and invest in the right resources. Although food waste management is a global
concern, it is often left at a consumer level due to the purchase, preparation, consumption,
storage, and disposal practices. However, businesses are slowly realizing their contribution to
food waste during the production, marketing, and selling levels. Comprehending the complexity
of the food waste reduction system is crucial from an economic and social perspective.
be adopted by GSC as a new standardized therapeutic diet meal in addition to the current menu.
Scenario 1 yield a net income of Rs. 156,100 and scenario 2 yield net income of Rs. 143,500.
GCS can track its progress and monitor the implementation process to fine-tune the production,
marketing, and delivery stages. For return on investment, Gopal has to develop a definable
strategy that accounts for the assumptions, risks, costs, and dependencies that may affect its
operations.
Table of Contents
COSTING AND COST SHEET 3
Executive Summary.....................................................................................................................................2
Introduction...............................................................................................................................................4
Literature Review......................................................................................................................................5
The impact of cost attribution and cost dynamics....................................................................................5
Theoretical Models Addressing Food Waste Costs Reduction................................................................7
Analysis and Calculations.......................................................................................................................10
Application of Incremental Analysis.....................................................................................................10
Conclusion.................................................................................................................................................13
References.................................................................................................................................................14
COSTING AND COST SHEET 4
Costing and Cost Sheet: Analysing the Cost at Gopal Catering Services
Introduction
improve performance and revenue to stay operational and thrive successfully. Food and
hospitality businesses can opt for total-factor framework and food cost performance
disaggregation models to enhance menu performance and maintain sustainable production (Chin-
Yi, 2020). Managers are tasked with assessing potential pricing mechanisms that account for the
financial and economic status of the business (Noreen et al., 2021). The management has to
understand the various operating costs and how they are represented in financial statements.
Besides computing for operating costs, managerial accounting conceptual frameworks enable
businesses to assess how costs and expenses behaviour with respect to the changing dependent
and independent variables. Profit planning and budgeting is possible if businesses can control
costs such as food waste costs to curb expenses that could impact profitability (Narvanen et al.
2019). To make effective decisions, managers can compare the actual results (sales, purchases,
and revenue) against the standard costs and planned objectives. Understand the type of data to
collect in relevance to the revenue and expenses of a firm will significantly impact the demand
This paper analyses the impact of cost attribution and cost dynamics on the company’s
leadership to address the cost unit. It also proposes three theoretical frameworks that address the
reduction of food waste costs that can help GCS’ leadership in taking decisions in the future. The
paper proceeds to apply the incremental analysis approach to demonstrate when GCS can
produce and drop its new standardized therapeutic diet meals. As the paper hypothesizes,
COSTING AND COST SHEET 5
acquiring the right financial statements can allow businesses to do proper food cost calculations
paving way for informed decision making regarding the operation, expenses, pricing, and
marketing. The current performance of GCS will determine how the customers will respond to
Literature Review
Cost attribution is the basic concept of determining the impact of various inputs and
activities on a business’ output, with the aim of developing a realistic pricing strategy as per the
cost causation. This principle recognizes that the existence of certain costs is dependent on direct
service provision as per the incremental decisions and incremental costs. Therefore, managers
have to decide on the allocation of deviation costs that arise due to resource variability. As Porter
establishes, cost dynamics allow businesses to analyse cost behaviour and cost drivers based on
the relative and absolute cost of value (Ellram, 1995). To thrive in the competitive food and
catering industry, GCS needs to consider its set of actions and competitors’ responses for
strategic management.
Since GCS offers its products and services to a variety of consumers (schools, offices,
colleges, and other ad hoc customers), the management could consider dynamic pricing. This
pricing mechanism will enable the management decide on flexible prices for the food as per the
prevailing demand patterns. The average cost per order could vary depending on a time-based,
al., 2020). When determining food prices, the management should note that the purchase cost
reduces when the demand is price inelastic and vice versa. Also, despite the changes in food and
COSTING AND COST SHEET 6
price quantities, effective consumer prices tend to decline. However, if the consumers do not
incur the disposition cost, then the consumption rate will always go high.
Adopting innovative food cost management approach is the right direction towards
understand where GCS is and where the company is going. Food cost is manageable; hence,
controlling this price will increase profitability and save money without necessarily bringing in
extra revenue. The company can track its inventory changes with regard to the total purchases
and sales to determine whether it is operating on profit of loss (Jurušs et al., 2019). From GCS’
case, the company has recorded Rs 18,493,750 in total sales while the purchases and expenses
amount to Rs 14,928,000. The profit of the business is at Rs 3,565,750, which means GCS is
The firm can also determine its unit cost (also cost of goods sold) while conducting the internal
management analysis by obtaining the values of the fixed and variable expenses that directly
affect the production, storage, and marketing of a single unit of a product. These expenses
include staff wages, marketing fee, charges to run machinery, etc. As a business expands, the
growth coincides with a lower unit cost. Reviewing these costs gives managers insight on the
management can maximize the profits at the lowest possible unit cost. In this case:
¿ expenses+variable expenses
=
Total units produced
= Rs 14,928,000
14,928,000
7,378,000
Since GCS has outlets in different locations, the business should compare its operating
costs and revenue accrued from all locations to see where each branch ranks (Singh, 2019). This
way, management will know where more resource investment is necessary to optimize operation,
Reducing food waste has become a corporate social responsibility owing to the global
concerns of food security and climate change. GCS, like other firms in the food industry should
actively engage in theoretical frameworks that address the reduction of food waste to not only
save planet Earth but also cut on costs (FAO, 2014). The approach the company takes will
impact future leadership decisions that will determine its success or failure. To address food
reduction, businesses should understand the contribution of the dependent and independent
variables. From a managerial perspective, the attitude of the management and stakeholders
COSTING AND COST SHEET 8
significantly influences food waste generation and prevention. As Blum (2020) explains,
managers should have strong interpersonal skills to effectively engage staff in the food waste
reduction program.
In this case, Gopal should assess the inventory management and checks practices,
understand the underlying business concept, and review food sales revenue for proper decision
making. With this approach, the company can accurately predict the number of expected
customers to design a more specific food menu and mitigate waste. GCS should engage the
kitchen staff like chefs through meetings, trainings, and conversations to find creative ways of
reducing food waste. Gopal should optimize its corporate commitment to reduce food waste and
Demand forecasting
GCS could predict its future food sales by analysing historical sales data to facilitate
informed decision making (Singh, 2019). With demanding forecasting, Gopal and his team can
estimate future total sales and revenue to add value and improve performance. Based on GCS’s
previous sales data, the firm has a probable rise in demand as the company is targeting various
market segments from all outlets. The company plans to produce new standardized therapeutical
forecasting will help GCS optimize its food supply to prevent waste.
Purchase planning
While enabling GCS stay competitive in the food and catering industry, purchase
planning is strategic procurement planning model that ensures the right quantity supply, quality
COSTING AND COST SHEET 9
maintenance, and cost minimization. Through purchase planning, Gopal can determine what
supplies the business needs in a proactive approach to obtain enough stock that meets the
demand forecasted.
Proper quantification
According to Blum (2020), restaurants can reduce food waste by generating a food waste
inventory that shows how much is being wasted and where. Exploiting smart tools and software
to measure accurately will enable managers to control production and understand the food order
patterns for better planning. GCS could invest in automated quantification tools that will offer
the firm an efficient strategy to reduce food waste while minimizing cost (Dhir et al 2020). This
innovative theoretical framework is a reliable cost-saving criteria due to the comprehensive food
management approach. Gopal spends heavily on manpower, hence, has competent staff to
implement these measures for significant adjustment on food waste and expenditure.
Other strategies GCS can apply to mitigate foot waste costs occasionally checking the
refrigerator to store the food in the “right to left” order (Behmen-Milicevic, 2019). The staff
should then use the food in reverse order to ensure the fresher products stay and the existing food
is closer to access. Recycling food waste to for example produce bioenergy will also provide an
determine true cost difference between alternatives. It’s a useful for business success since it
incorporates the decisions to outsourced and self-produced functions (Dickinson, 2015). Also,
it’s a problem-solving method that applies accounting data to make sound decision for
organizations. Therefore, Gopal Catering Service should adapt this approach to identify potential
outcomes of an alternative strategy compared to another. In this section, there are assumptions
that GSC is planning to produce a new standardized therapeutic diet meal in addition to the
current menu. Incremental analysis is used to demonstrate when the new diet can be produced or
Scenarios
Assuming that GSC is considering to produce a new standardized therapeutic diet meals to add
their existing menu. Let call Scenario 1 Alternative A and Scenario 2 Alternative B.
Alternative A Expenses
Miscellaneous 16,000
Alternative B expenses
Miscellaneous 20,000
Scenario 1 reports a net income of Rs. 156,100, while Scenario 2’s net income is Rs.
143,500. Based on the above financial data, GCS management team should adopt scenario 1 as a
new standardized therapeutic diet meal in addition to the current menu. Scenario 1 can be
produced when the firm need to make more profits since the total expenses are less compared to
alternative B. However, Scenario 1 can be dropped if Alternative B reduces the total expenses.
This is because Alternative B has more total revenue compared to alternative A. On the other
hand, Scenario 2 can only be feasible if the management of GCS can work on expenses by
reducing them since its total revenue are higher compared to alternative A. Therefore, Scenario 1
Conclusion
Calculating food costs and analysing the financial statements of a food and catering
business are crucial steps in boosting profits and achieving the set objectives. Despite the hard
work of the firm personnel and level of investment, controlling food costs helps meet market
demand and stay operational despite market and other impromptu changes. One approach to
control food costs is to reduce food wastes. Demand forecasting, proper quantification, and
purchase planning are efficient approaches to managerial accounting. All these frameworks will
COSTING AND COST SHEET 13
enable a business to identify and consolidate consumer requirements and determine how the
company resources can best meet the demand without food wastes. Additionally, after carrying
standardized therapeutic diet meal in addition to the current menu. Scenario 1 yield a net income
References
https://possector.com/management/restaurant-food-waste-reduction
Blum, D. (2020). Ways to reduce restaurant industry food waste costs. International Journal of
Chin-Yi, F. (2020). From the total-factor framework to food cost performance Disaggregation –
9552.
Christ, K, and Burritt, R. (2017). Material flow cost accounting for food waste in the restaurant
Dhir, A., Talwar, S., Kaur, P. and Malibari, A. (2020). Food waste in hospitality and food
Dickinson, R. (2015). Incremental analysis: For retail decision making. In Proceedings of the
Cham.
Food and Agriculture Organization (FAO). (2014). Food waste footprint: Full-cost accounting.
http://www.fao.org
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Jurušs, M., Roze, L., and Lūka, M. (2019). Impact of value added tax on restaurant services.
Noreen, E., Brewer, C. and Garrison, H.(2021). Managerial Accounting - seventeenth edition.
Raucci, D., Lepore, D., & Sabatiello, R. (2020). Activity-based pricing in small and medium
sized restaurants. Evidence from the Italian context. International Journal of Culture,
Singh, S. (2019). Cost estimation using econometric model for restaurant business.