Basic costs incurred within hospitality and catering

• What are the three different types of costs that impact the success of a hospitality and catering business?

  Labour costs, material costs, and overheads
• What do labour costs refer to in a hospitality and catering business?


  They refer to the salaries and wages for all staff connected to the business
• What are material costs in the context of hospitality and catering?


  They are the costs of things such as ingredients and consumables
• What do overheads include in a hospitality and catering business?


  They include costs such as rent, energy, water, and insurance
• How can costs be categorized in a hospitality and catering business?

  Costs can be categorized as variable costs and fixed costs
• What are variable costs?


  Variable costs are costs that can change depending on the amount of business
• What are fixed costs?


  Fixed costs are costs that are always the same, such as rent and insurance
• What is gross profit?

  Gross profit is the money left over when food costs have been deducted from sales income
• What is net profit?


  Net profit is the money left over when all costs have been deducted from sales income
• If a restaurant has food sales of £200,000 and food costs of £55,000, what is its gross profit?


  £145,000
• If a restaurant has total sales of £200,000, food costs of £55,000, labour costs of £33,500, and overheads of £38,100, what is its net profit?


  £73,400
• What are the definitions of variable costs and fixed costs?


  • Variable costs: Costs that change depending on the amount of business, e.g., stock purchased.
  • Fixed costs: Costs that are constant, e.g., rent and energy bills.
• What is the difference between gross profit and net profit?

  • Gross profit: Money remaining after deducting food costs from sales income.
  • Net profit: Money remaining after deducting all costs (material, labour, overheads) from sales income.