Question

Describe the potential advantages of using daily and cumulative figures for food costs and food costs percents, rather than relying exclusively on end of the month calculations". Use examples and specifics to help support your thoughts

Answer 1

It is a correct assertion that daily and cumulative figures for food costs rather than relying on a periodic calculations. The advantages of doing so are:-

1) Using a daily and cumulative figure helps in regular monitoring and this would help us in initiating necessary corrective/preventive action in a timely manner rather than just relying on end of month data to initiate these actions. For example, if we receive a report at end of month and it shows a huge variance in food cost, then we cannot do anything and corrective actions would only be applicable in next month but if daily numbers are available, then even necessary actions could salvage the situation in this month also

2) With a daily and cumulative number, one can have a trend and also regular comparison with budget. This would enable one to align the operations to have favorable variance with regards to budget. Also trend analysis can help in uncovering time series factors such as seasonality or cyclicity. For example, by charting figures on a daily basis important cyclic behavior could become apparent which may be obscured by data available only at month end