OH 6-1 Agenda Chapter 5 Workbook Chapter 6 - Controlling Food Costs in Receiving, Storage and Issuing Chapter 6 Workbook

OH 6-2 Controlling Food Costs in Receiving, Storage and Issuing Controlling Foodservice Costs 6 OH 6-2

OH 6-3 Chapter Learning Objectives Differentiate among the three receiving standards Describe proper procedures for receiving goods Describe food storage techniques used to control theft. Explain the first in, first out (FIFO) method of stock rotation. Describe the proper method of taking inventory.

OH 6-4 Chapter Learning Objectives continued Describe the various methods of inventory pricing (valuation). Calculate inventory turnover rate and inventory value. Compare physical inventory to perpetual inventory. Calculate a daily food cost.

OH 6-5 Three Receiving Standards Quality Receiving same as quality ordered Company standards and specification for each item Quantity Receive same amount ordered Check against purchase order Price Receive at price quoted at order

OH 6-6 Steps for Receiving Step 1 – Delivery person brings products to receiving area. Step 2 – Check products against the purchase order. Step 3 – Check products against purchase specifications. Step 4 – Check delivery quantity against the invoice and the purchase order.

OH 6-7 Steps for Receiving continued Step 5 – Match invoice prices to purchase order prices. Step 6 – If everything matches correctly, sign the invoice. Step 7 – Put delivered products in proper storage areas. Step 8 – Process paperwork in keeping with the operation’s standard operating policies and procedures.

OH 6-8 Storage Practices Impact Profits Spoilage of products Theft of products

OH 6-9 Sales Needed to Replace the Value of Spoiled or Stolen Items Assume 5% restaurant net profit Assume loss of two $7.00 cost each Amount lost ÷ Net profit percentage = Additional sales required to replace lost revenue $14.00 ÷ 0.05= $280.00

OH 6-10 Controlling Spoilage Storage loss from spoilage is usually caused by carelessness. Spoilage loss can be controlled. Spoilage is caused by Improper product rotation Time abuse Temperature abuse

OH 6-11 Controlling Spoilage continued Excellent sanitation practices help minimize spoilage loss.

OH 6-12 First In First Out (FIFO) Use for refrigerated, frozen, and dry products Use oldest product first. Relies on The receiving clerk (to rotate stock properly) The person using the product (to choose properly) Must be continually monitored by management !

OH 6-13 Dry Storage

OH 6-14 Fresh Fruits and Vegetables

OH 6-15 Eggs and Dairy

OH 6-16 Meat and Poultry

OH 6-17 Fish

OH 6-18 Proper Sanitation Is Key Store foods away from walls and at least six inches above the floor. Store dry goods in airtight containers. Walls and floors should be nonporous and easily cleaned.

OH 6-19 Proper Sanitation Is Key continued Rotate stock to minimize spoilage. Organize products so they are easily found. Label shelves and sealed food containers. Include “use by” dates and name labels for all stored products.

OH 6-20 Controlling Theft Keep storage areas locked whenever practical. Establish a par stock per shift system for key ingredients. Issue secondary sets of keys on an as-needed basis only.

OH 6-21 Sample Requisition Form Large foodservice operations may use a requisition system to help control theft-related losses.

OH 6-22 Inventory Types Physical inventory An actual count of inventory items Usually taken to obtain information for the income statement. Perpetual inventory A count based upon additions to (purchases) and subtractions from (requisitions) storage If records are properly kept, it is always up-to-date.

OH 6-23 Common Inventory Breakdowns Meats Dairy Bakery Produce Frozen foods Canned foods Dry goods

OH 6-24 Common Inventory Breakdowns continued The type of restaurant you manage will help determine the specific inventory breakdowns best suited for your use.

OH 6-25 Sample Inventory Sheet

OH 6-26 Inventory Valuation Methods FIFO First in, first out Inventory is valued at its most recent (latest) cost. Oldest product is used first. LIFO Last in, first out Inventory is valued at the cost of the oldest product. Newest product is used first.

OH 6-27 Inventory Valuation Methods continued Averaged price method Inventory is valued at a composite of all prices paid for the item. Actual price method Each inventory item is valued at its original purchase price.

OH 6-28 Inventory and Cost of Food Sold Inventory value is a critical component of the cost of food sold formula. Opening inventory +Purchases Total food available –Closing inventory Cost of food sold

OH 6-29 Inventory Turnover Calculation Step 1 – Calculate average inventory. Step 2 – Calculate the inventory turnover. ( Opening inventory + Closing inventory ) ÷2= Average inventory Cost of food sold ÷ Average inventory = Inventory turnover

OH 6-30 Daily Food Cost Percent Calculation Using Perpetual Inventory Step 1 – Compute daily food cost. Step 2 – Compute food cost percentage. Requisitions +Transfers in –Transfers out Daily food cost ÷ Daily unit sales = Daily food cost percentage

OH 6-31 How Would You Answer the Following Questions? 1. The greatest cause of inventory loss is ( theft/poor buying practices ). 2. The most common product storage method used in foodservice is ( FIFO/LIFO ). 3. The type of inventory that is based upon a theoretical count is called a A. Breakdown inventory B. Requisition inventory C. Physical inventory D. Perpetual inventory 4. Daily food cost divided by ( unit sales/transfers out of inventory ) equals daily food cost percentage.

OH 6-32 Key Term Review Actual price method Averaged price method Daily food cost Extending FIFO method Inventory Inventory breakdown Inventory turnover Issuing

OH 6-33 Key Term Review continued Latest price method LIFO method Padding Perpetual Inventory Physical inventory Requisitions Time and temperature control Transfer

OH 6-34 Chapter Learning Objectives— What Did You Learn? Describe food storage techniques used to control theft. Explain the FIFO method of stock rotation. Describe the proper method of taking inventory. Describe the various methods of inventory pricing (valuation).

OH 6-35 Chapter Learning Objectives— What Did You Learn? continued Calculate inventory turnover rate and inventory value. Compare physical inventory to perpetual inventory. Calculate a daily food cost.