Theory

This chapter introduces cash budgets that are used to plan for cash collections, cash disbursements and planning for loans. Costs can be classified in many ways, but the most important is with regard to a cost’s behaviour with changes in some cost driver. Fixed costs result from decisions made by management and are classified as being either committed or discretionary. An important criterion in budget-setting is that short-term goals be in accordance with the long-term strategic plan. Food cost and labour are a restaurant’s largest expense categories. With a good budget in place, a restaurant manager can use the accounting system to achieve effective managerial control. The flexible budget variable cost results from the static budget’s variable cost per unit times the standard amount of beef. Restaurant managers must know how to plan ahead and later exercise control so as to ensure that their establishments perform well.