Foundations of cost control by daniel traster chapter09

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

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

Clipboards Calculators Desk

Computer File Cabinets

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Needed from Purchaser

Checking Products and Invoices

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Invoice Adjustments and Approvals

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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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Dry Storage

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Chemical and Cleaning Supplies

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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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Closed vs Open Storerooms

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Closed Storerooms

Pro: More control

Con: More costly,

requiring high labor

costs for a storeroom

manager or clerk

vs.

Open Storerooms Pro: Less costly Con: 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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• 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

Valuing Inventory

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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.

Using the FIFO Method, What is the

value of the flour in inventory?

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.

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

=

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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Inventory Turnover Rate Formula

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…

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?

Benefits of Quick Turnover

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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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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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