Class NameInstructor NameDate, Semester

Foundations of Cost ControlDaniel Traster

Receiving, Storage, and Issuing Control

chapter 9

Opening Questions

• Describe a foodservice receiving area that you have seen.

• What goes on there (specifically)?

• What equipment is present and used there?

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Required Resources for Receiving

Well-trained Employee

Space to receive

Scales

Thermometer

Knife

Ruler

Hand Truck

Dollies

Cleaning Supplies

Pens, Paper

Clipboards

Calculators

Desk

Computer

File Cabinets

3

Needed from Purchaser

• Order Sheets

• Bid Sheets

• Product Specifications

• Daily List of Deliveries

4

Checking Products and Invoices

5

Invoice Adjustments and Approvals

6

For poor quality or quantity:

• notify driver• request credit memo • make note on invoice • have driver initial

For incorrect pricing:

• notify purchaser to speak with the purveyor • do not sign invoice until issue is resolved

For shorted items:

• notify purchaser and chef

Approving the Invoice

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Receiving Clerk’s Daily Report

• List of all items received on a given day

• Includes quantities and prices

• Sorts items as ―Directs (go to kitchen)―Stores (go to storeroom) ―Sundries (non-food or –drink)

• Easier to track daily food and beverage costs

• Send with invoices and credit memos to accounting

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Food Storage

• Done quickly after receiving to prevent spoilage and theft

• Store frozen and refrigerated products first

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Coolers

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Guidelines

Keep shelving 6

inches from wall and floor

Do not place anything in front of the

fan

Store- cooked food above raw

Fridge at 33-40 F, freezer

below 0 F

Should have locking

capability

Dry Storage

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Guidelines

Shelving 6 inches from

floor and walls

Keep 60 – 70 F and low humidity

Should have lockable

doors

Chemical and Cleaning Supplies

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Guidelines

Store after foods are

stored

Keep separate from food to avoid cross-

contamination

Store in original,

well-labeled containers

Storage Guidelines

• Rotate stock using FIFO to reduce the risk of product spoilage in storage; place new products behind old ones.

• Keep identical products in the same location.

• Organize inventory sheets to align with product location on shelves.

• Spoilage Report – lists products that spoiled in storage.

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Requisitions and Issuing

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Open Storeroom

• employees gather products themselves

Closed Storeroom

• employees make written request for products; request filled by storeroom clerk or manager

Requisition

• the written request (on paper or electronically) for products from storeroom

Issuing

• the process of releasing requested products from storage to an employee

Closed vs. Open Storerooms

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Closed Storerooms

Pro: More controlCon: More costly, requiring high labor costs for a storeroom manager or clerk.

vs.

Open Storerooms

Pro: Less costlyCon: Less secure

Storeroom Controls

Open Storeroom controls:

• Keep storeroom open only briefly and watch employees closely during that time.

• Only managers access storeroom when not actively open.

• Keep expensive products locked up; only manager can access them.

General Controls:

• Conduct regular inventories to catch high food cost problems early.

• Install security cameras.

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Requisition and Issuing Process

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Transfers

• Transfer form looks like requisition form but lists departments issuing and receiving

• Sent to cost control manager with requisitions

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A transfer is issuing or receiving food from another department or business unit.

Conducting Inventory

• 1 person counts and 1 person records

• Use blank sheets or printed inventory lists

• Can use handheld scanners

• Completed sheet includes name, quantity, unit, and extended price for each item

• Do when restaurant is closed and no deliveries are scheduled

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Valuing Inventory

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NOTE: Price per unit is not always obvious, since prices may change with each order.

Extension

Number of Unit

s

Price

per Unit

Valuing Inventory

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Techniques to Value Inventory

FIFO

LIFO

Weighted Average

Actual Cost

Most Recent Price

FIFO (First In, First Out) Method

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Assumes cost is based on most recent invoice and only progresses back in time if there is more inventory than can be accounted for with the latest invoice.

Example 9a

• A restaurant has 140# of flour in inventory on Aug. 20th.

• It purchased: ―50# on Aug. 3rd for $23/50# ―50# on Aug 10th for $24/50#―100# on Aug. 17th at $23.50/50#.

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Using the FIFO Method, What is the value of the flour in inventory?

Example 9a (cont.)

100# @ $23.50/50# = 100 X 23.50 ÷ 50

= $47

40# @ $24/50# = 40 X 24 ÷ 50

= $19.20

Total for 140# = $47 + $19.20

= $66.20

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LIFO (Last In, First Out) Method

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Cost based on the first invoice for the period and only progresses forward once the entire inventory for that invoice has been accounted for.

Example 9b

50# @ $23/50# = 50 X 23 ÷ 50 = $23

50# @ $24/50# = 50 X 24 ÷ 50 = $24

40# @ $23.50/50# = 40 X 23.50 ÷ 50 = $18.80

Total for 140# = $23 + $24 + $18.80 = $65.80

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From data in example 9a, calculate the value of 140# of flour using the LIFO method.

Weighted Average Method

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Price per unit

total amount spent on an ingredient over the

inventory period

total number of units of that ingredient

purchased during the same period

=

Example 9c

50# X $23/50# = $23

50# X $24/50# = $24

100# X $23.50/50# = $47

Total Flour expense = $23 + $24 + $47 = $94

Total weight = 50# + 50# + 100# = 200#

Price per unit = $94 ÷ 200# = $0.47/#

Value of 140# = 140# X $0.47/# = $65.80

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From data in Example 9a, calculate value of 140# of flour using Weighted Average.

Actual Cost Method

• Inventory sheet must have multiple lines per product as identical products with different unit costs must be counted separately

• If inventory is properly rotated, this method is the same as the FIFO method

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The Actual Cost Method uses the price written on each unit at the time of storage.

Most Recent Price Method

• Uses the most recent invoice price as the price per unit for all units of that item in inventory.

• Referring to example 9a, all 140# of flour would be valued at $23.50/50# for this method.

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Total Inventory Value

Total inventory value = sum of all inventory item extensions

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The inventory value is both the closing inventory value for the prior period and the opening inventory value for the upcoming period.

Preventing Inventory Theft

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People

• only put honest, trustworthy people in positions of power

Locks and Cameras

• lock up expensive items; only give keys to managers. • use security cameras

Paper

• create a paper trail with employee signed requisitions

Inventory Quantity

• minimize amount of inventory kept on hand

Inventory Turnover Rate Formula

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Average InventoryOpening Inv + Closing Inv

2

=

Inventory TurnoverCost of Food Sold

Average Inventory

=

Inventory Turnover Rate

• Ideal rate is for inventory to turnover every 1-2 weeks.

• To convert monthly inventory turnover rate to days to turnover the inventory…

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Days to turnover inventory

# of days in the month

Inventory turnover

=

Example 9d

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For January, cost of food sold in restaurant is $37,500. Opening inventory for January is $12,300 and closing inventory is $12,900. How often (in number of days) does this restaurant’s inventory turnover?

Example 9d (cont.)

Average Inv. = (Opening + Closing) ÷ 2

= ($12,300 + $12,900) ÷ 2

= $12,600

Inv. Turnover = Cost of Food Sold ÷ Avg. Inv.

= $37,500 ÷ $12,600

= 2.98

Days to Turnover = Days in Mo. ÷ Inv. Turnover

= 31 ÷ 2.98

= 10.4 days36

Benefits of Quick Turnover

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Helps control theft, as

stolen items are noticed

quickly

Ties up less money

in inventory

Reduces chance of spoilage

Reduces space

needed to house

inventory

Special Concerns for Beverages: Receiving

• Alcohol picked up at ABC store checked by person picking it up and checked again by someone else at the business

• Never leave delivered alcohol unattended until it is secured in storage

• Schedule alcohol deliveries when no other deliveries are scheduled

• Check labels and fill levels carefully

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Special Concerns for Beverages: Storage

• Lock up alcohol and limit the number of managers with key access.

• Store each type of bottle in its own bin.

• Use bin numbers and order bins numerically for easy location.

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Special Concerns for Beverages: Storage

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Storing Wine

•low light•controlled humidity•55 degrees for red•45 degrees for white

Storing Beer

•in original cases•once chilled, keep refrigerated •store kegs at 40 – 50 degrees

Special Concerns for Beverages: Issuing

• Use a bottle exchange program.

• Use written requisitions (even if storeroom is otherwise open).

• Ideally, only one manager has the key and the right to issue alcohol.

• Managers must check paperwork against inventories and verify control procedures are being implemented properly.

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