Food-Service-Manual-for-Health-Care-Institutions

may still use manual systems, in which case the department is involved in collecting labor cost
data. However, this is one of the most commonly computerized functions in health care operations.
With these types of systems, the food service manager may merely need to review the
data that will be used by the payroll system to determine labor costs. In addition to the costs
of wages and salaries, the cost of providing benefits, both optional and required by law, must
also be determined.
A labor budget includes all personnel, full- or part-time, and contract employees (if used)
who are needed to get the work accomplished; it does not include benefits. Labor budgets as
well as expenses, material, and other operating costs may be allocated to various cost centers
such as clinical nutrition, administration, catering, production, and retail operations. Labor cost
may also be broken down to direct and indirect labor costs. Direct labor costs are the cost of
labor plus overtime or other pay in lieu of benefits, such as pay to a consultant. Indirect labor
costs include benefits such as insurance, taxes, and paid time off.
Materials Budget
Control Function and Financial Management
Food service also has a materials budget. Materials include raw materials to be used in the production
and service of food and meals. Other materials may include office supplies, books,
chemicals, computer paper, continuing education, and replaceable small equipment such as
knives, china, glasses, and printing costs.
The requisitioning, maintaining inventory, and controlling stock for such supplies are the
same as those for food supplies. The costs involved and the quantities used are also determined
by calculating beginning inventory, monthly purchases, and closing inventory. Records may
also be kept and information reported by type of commodity, such as paper supplies and cleaning
supplies.
When possible, all supply costs should be allocated directly to either patient or nonpatient
services. The ratio used to determine patient and nonpatient costs for food and labor can be
used for supply costs as well. For example, if 51 percent of the meals prepared by the department
are served to nonpatients, 51 percent of the supply cost should be allocated to the cost
center for nonpatient services.
Food Cost Budget
Purchasing, food issues, and transfer records are used to document food costs. Purchasing
transactions are usually documented by means of invoices that accompany deliveries or by bills
issued by vendors. The actual food issued to the production units of the food service department
can be documented by requisition forms prepared by production employees or produced
by computerized systems. Other aspects of food costs that should not be overlooked are the
cost of food transferred to patient floors and other units of the operation. A count of all food
items transferred should be recorded on a form similar to the one illustrated in Exhibit 11.3.
Systems must be developed so that source documents of food costs can be collected and made
available to the processing elements of the financial management system.
Overhead Budget
Most food service operations incur costs for products and services that do not fall in the categories
of costs discussed previously. Examples include repairs and maintenance, laundry services,
pest control, telephone, and postage. These costs can be traced directly back to the food
service department based on the existence of a variety of source documents.
Allocated Cost Budget
The final category of costs are those generated by the health care operation or food service
department but for which no source document exists. For instance, the food service department
is usually one of the largest consumers of energy. However, unless the department has separate
utility meters, the cost data for energy are not available and cannot be collected. These costs
may be allocated to the various departments in the operation.
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