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P&L Fundamentals

Before you explain a bad month, you need to read it correctly. These are the basic financial translations every foodservice manager should make quickly.

Four rules

  1. Percentages vs. percentage points: 31% to 35% is +4 points, not +4%.
  2. Translate points to dollars: variance points × sales tells you roughly what the miss costs.
  3. Variance is not root cause: “food cost is high” describes the problem; price, usage, waste, mix, inventory and shrink explain it.
  4. Profit is the result: diagnose the revenue and cost lines that created the profit gap.

Practice

1. Food cost moves from 31% to 35%. What is the correct way to state the change?
2. Monthly sales are $500,000. Food cost is 4 points over budget. About how much extra food cost does that represent?
3. Sales are $480,000 versus a $500,000 budget. What is the dollar variance?
4. Labor is 29.0% budget and 31.5% actual. Sales are $400,000. What is the approximate labor-dollar miss?
5. Operating profit budget is $55,000 and actual is $32,000. Which statement is strongest?
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