Question

Andrea Wasserman knows her business, but she often wonders if anyone else really does. Andrea owns and operates a successful catering company. Each catered event she manages is unique. Her company enjoys an excellent reputation because of Andrea's attention to detail and total commitment to customer service.

In a good month, Andrea and her staff of 25 employees will serve over 10,000 lunch and dinner meals. Sales last year exceeded $2,500,000. Andrea's company was simply the one that people always called when a large specialty party or event needed to be executed extremely well.

The biggest catered event Andrea held last month involved a political fundraiser for the Governor. Her company served 3500 people for dinner at the Fairgrounds, and Andrea's team performed flawlessly. Although she was confident that she knew how to operate her business, she wondered about her profitability. Were her food production people and bartenders as cost conscious as they should be? Were her servers truly efficient? Were her profits “reasonable”? These were legitimate questions, and Andrea wanted solid answers.

Select one food and one labor ratio you think Andrea should compute to monitor the success of her business. Explain why each ratio is relevant to Andrea, keeping in mind the circumstances of her recent catering event.

Please explain it in a different way. don't copy from the other answers.

Answer 1

In order to increase profitablity the cost ratios has to be managed well. Two ratios that can be used to monitor the cost are

· Food cost per meals

· Labor hours per meals

The food cost per meal helps in understanding the cost of food at a meal level. The lower the cost per meal the higher is the profitablity. These costs are directly variable at each meal level. Hence understanding the cost is very important. The cost of meal is in 2 components – first price of ingredients used in preparation and next is efficiency the quantity of input used in preparation of food. This ratio indicates the success of her business in terms of cost management

Labor hours per meals helps in understanding the labor hours utilised in serving the food at the venue. These costs are also directly variable. The lower the labor hours per meal the more efficiency and cost savings which will impact the profitablity. This ratio indicates the success of her business in term of cost management and efficiency.