These are known as variable costs because the actual cost will vary according to the volume of business, quality of food purchased, control of wastage and accurate weighing, measuring and portion control. 

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  All labour costs are divided into direct and indirect costs. 

  Direct labour costs- are attributed to the wages paid to chefs, waiters, bar staff and kitchen assistants where the cost can be directly related to the income from food and drink sales. 


Indirect labour costs- are credited to the wages paid to managers, office staff, and maintenance personnel who work for all departments and therefore their costs are spread over the number of departments that have a direct income. 

3.  Overheads (gas, electricity, rates, servicing, advertising, rent and equipment). It is important to factor the costs of overheads into every dish because these are the ‘unseen’ aspects of the serving of an individual dish.

An area that is sometimes overlooked is cleaning materials. It is important to understand and recognise the costs of these and to ensure that an allowance in made for them in this section.

 To enable the caterer to control the element of profits it is usual to express this in terms of a percentage of the selling price of a dish. 


There are two terms of profit that must be distinguished.

1Gross Profit is the difference between the cost of the food to prepare the dish and the selling price of the dish.

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  Selling price – Food cost = Gross profit

2.  Net Profit is the difference between the selling price of the dish and the total cost of the dish ( labour, overheads and cost of food).
 
 Selling price – Total cost = Net profit