Here are the calculations for the stock levels of component A: a) Re-order level = Normal usage per week x Normal re-order period = 50 kg/week x 5 weeks = 250 kg b) Maximum level = Re-order level + Re-order quantity - (Minimum usage x Minimum re-order period) = 250 kg + 300 kg - (25 kg x 4 weeks) = 250 kg + 300 kg - 100 kg = 450 kg c) Minimum level = Re-order level - (Normal usage x Normal re-order period) = 250 kg - (50 kg x 5 weeks) = 250 kg - 250 kg = 0 kg d

1. Chapter 4. Storing and Issuing
4.1 Procedure for storage of Perishable and Non – perishable Food & Beverage Items
4.2 Stock records ( Formats & Importance) – Bin cards, Stock Cards, Inventory
Records
4.3 Store Issues( Formats & Importance) – Transfer Notes, Breakages and Damaged
Goods
4.4 Stock Taking , Stock Turnover, Stock Levels – Maximum Level, Minimum Level,
Reorder Level, Safety Level, Danger Level

2. 4.1 Procedure for storage of Perishable and Non – perishable Food & Beverage Items
Storing is the third stage in the Operating Cycle and is of most critical importance in the
F & B control process. The main objective of storage is to ensure adequate supply of food &
beverages to always satisfy the immediate need of the establishment.
Upon receiving the goods, the Receiving department categorises the food items as
perishable and non – perishable items. The perishable items go straight to the kitchens, where
they are stored either in refrigerators or cold rooms depending on the item. Perishable goods
sent to the kitchens are directly charged to them as they are usually used within one to three
days of delivery by the kitchens. Meat, fish, dairy products, fruits & vegetables and deep –
frozen foods are stored separately.

3. Large establishments follow strict procedures of storing meat, fish, dairy products, fruits &
vegetables and deep – frozen foods separately.
The non – perishable items like canned foods go to the food stores where they are
unpacked, checked for damage and then placed in their individual bins, racks, drawers,
cupboards.
Storing is done scientifically in all organisations. Items required on daily basis are
stored near the door where issues can be easily done. Other items are then stored in the logical
and sequential manner.
Categories or groups of commodities are made and accordingly arranged. For e.g.,
canned foods, dry fruits etc., are arranged into sections.

4. The layout of the stores should be such that it reduces the time and motion of the
storekeeper when issuing the items. Many control techniques are used in storing to make it
scientific and cost controlling. ABC ( Always Better Control) Analysis, VED ( Vital, Essential
and Desirable) Analysis, are used by many organisations.
Beverage storing is also an important task in F & B outlets. Once beverages are
received , they are immediately sent to the cellar and a tight control is always maintained.
Different types of beverages are stored at different temperatures to ensure quality. In addition,
returnable value of crates and bottles is also ensured. Proper collection of empty crates and
bottles will help in controlling unnecessary cost.

5. 4.2 Stock records ( Formats & Importance) – Bin cards, Stock Cards, Inventory Records
The storekeeper and persons working in stores are primarily responsible
for safeguarding the materials and keeping materials & supplies in proper places
until required in production.
The basic accounting records of any inventory system are the documents
required to authorise & record materials movement into & out of the stores.
Stores Ledger Card and Bin Card, Material Requisition Note, Bill of
Material, Material Return Note, Material Transfer Note, are documents which are
maintained in the procedure of storing and issuing.

6. Bin Card: It usually shows quantity of each type of material received,
issued and on hand. It is placed in the bin, shelf or is hung over the
cupboard or the rack otherwise known as bin.
Separate bin cards are prepared for each item of stores and if two
different materials are kept in one cupboard, two bin cards, one of each
are prepared.
A physical bin card is as follows:

7. ABC Company
BIN CARD
Description__________ Bin No._______
Stores Ledger No.____ Code No._____
Minimum Level_______ Unit No.______

8. Stores Ledger Card: These show the quantities on order, expected delivery dates and
quantities reserved or required for work due to be processed.
ABC Company Ltd.
Stores Ledger Card
Description________________ Code_________________
Unit______________________ Location______________
Maximum Level_____________ Minimum Level_________
Reorder Level______________ Reorder Qtty___________

9. 4.3 Store Issues( Formats & Importance) – Transfer Notes, Breakages and
Damaged Goods
Issuing should take place at set times during the day only and only against a requisition
note signed by authorised person, for e.g., Sous chef or Restaurant manager in hotels. When the
requisition is large, it should be handed in several hours before the items are required. This
allows the storekeeper plenty of time to collect all items together.
The pricing of issues is usually at the purchase price ignoring all small discounts. Non –
perishable items are marked with the current price when they come into the stores. The pricing
of perishable items is often done by the control office after they have been issued as they have
access to suppliers 'invoices.

10. a. Material Requisition Note: It is a written order to the storekeeper
to deliver materials or supplies to the place & the department
designated or to give the materials to the person presenting a properly
executed requisition.

11. ABC Company Ltd
Materials Requisition Note
Job No.__________ Serial No.________
Date____________
Authorised By_________ Storekeeper________
Prices entered_________ Received by________
Bin Card entered_______ Calculation checked__

12. b. Bill of Material: Departments having standard materials requirements or a
comparatively fixed list of materials or supplies generally use a special form of
materials requisition called the “Bill of Materials”.
It is a printed or duplicated form listing all the materials and part necessary
for a typical job or production.

13. ABC Company Ltd
BILL OF MATERIAL
Job/Work order No.________ No.________
Description of Job_________ Date:_______
Prepared by______ Stores Dept____ Cost Dept _______
Checked by_______

14. c. Material Return Note: When materials are requisitioned from the
stores and are either not needed or found to be defective, they are
returned to the stores. A Material return Note is prepared either by the
person returning the materials or by the storekeeper upon receipt of the
materials.
Two copies are prepared, the original being used for crediting the
accounts charged , while the duplicate is filed by the department
returning the goods.

15. ABC Company Ltd
MATERIAL RETURN NOTE
Issuing Dept____________ No._________
Job No________________ Date:________
Works Manager/Foreman’s Sign

16. d. Material Transfer Note: Some departments may prefer to use the
excess materials on the next job instead of returning them to the stores.
In order to prevent charging one job the cost and other little or no cost,
a material transfer note is prepared to transfer the cost from the original
job to the new job.
The transfer is also noted in the Stores ledger account.

17. ABC Company Ltd
Material Transfer Note
Serial No._________
Date:____________
The following materials have been transferred from
Job No._____________ to Job No._________
Authorised by Delivered by Received by Priced by
________ ________ ________ ______

18. Materials returned to Supplier: In case of damaged, unsatisfactory, excess
material may be returned to the supplier. If goods are returned after having been
received in stores & entered in the stock ledger account, correcting entries are
required.
Goods returned by the Purchasing Dept. are recorded in the Stores Ledger
accounts in red ink in the Received Section, based on the reject/dispatch note
issued by the Purchasing Dept. It can also be recorded in the Issued section of the
Stores Ledger Account.

19. Breakages and Damaged Goods:
It is necessary for any damages or breakages to be recorded on a standard
form, together with an explanation. It must be countersigned by a member of the
F & B management department. The frequency of the recording of any breakages
& damages would determine the necessity for management to take corrective
action.

20. 4.4 Stock Taking , Stock Turnover, Stock Levels – Maximum Level,
Minimum Level, Reorder Level, Safety Level, Danger Level
In addition to the daily check kept on the receipts & issue of items from the
stores & cellars, a periodical stock taking is necessary for a number of reasons.
The most important objective of stock taking is the ascertaining of the actual
value of goods in hand as that mentioned as the book value of stock. It helps in
determining the food & beverage costs for a period which in turn is necessary for
preparation of Profit & Loss Account & the Balance Sheet.

21. The physical stock taking is an important task which should be undertaken by
senior staff, usually from the accounts department, aided by a member of staff from the
food & beverage department or from the purchasing department, who will be able to
assist with the nomenclature of goods & their units. In small organizations, the physical
stock taking is done by the manager.
Properly printed stock sheets should be prepared in advance to assist in
recording the information accurately & as quickly as possible. The time of stock taking
is very important; it must be done at the end of one trading period & before the start of
the next one, irrespective of whether the period ends on Saturday, Sunday or a Bank
holiday.

22. Any goods received during stock taking should be kept separately until the stock
taking is completed.
Once the stock taking has been completed & all discrepancies investigated, the
stock records should be adjusted to show the actual quantity of each item in hand.
Professional stock takers are sometimes used by establishments, usually for the
yearly stock take which will provide information to the accountants for the preparation
of the final accounts.

23. Stock Turnover: The rate of stock turnover is calculated by the following
formula:
Rate of Stock Turnover = Cost of food consumed
Average Stock at cost
Management should establish guidelines for the purchasing officer as to
the value of stock which is to be held at any period, the rate of stock turnover
required etc. The rate of stock turnover will vary with different types of
establishments because of size of stores, location of the establishment in relation
to suppliers etc.

24. Stock Levels: The level at which any item of stock to be held is difficult to
predict as two dangers are always present namely, of either running out of stock
of an item or of overstocking of the item & thereby tying up unnecessary capital.
Stock level refers to the amount of goods or raw materials that should be
maintained by businesses to continue their activities and avoid any situations like
understocking or overstocking. Every organization should always keep an
optimum amount of inventory to ensure the regular operation of its production
activities.

25. Inventory acts as a bridge between production and sales of business and
ensures a regular supply of finished goods to customers. Raw materials, work-in-
progress, finished goods and various consumables like fuel and stationery are
three important types of inventories that every firm needs to maintain.
The main determinants of stock levels are as follows:
1.The maximum & minimum forecast usage figures for the trading period,
which is based on the forecast sales & past histories.
2.The reordering time for the items.
3.The economic ordering quantity.
4.Market trends, including changes in delivery, price & scarcity.

26. 5. The storage space available.
6. The shelf life of the item.
7. Budget available for purchasing.
Some of the above determinants are beyond the control of the purchasing manager.
However, his contribution must be towards the correct stock levels, improving the rate of stock
turnover & the return on assets.
Following stock levels have to be determined: -
1) Maximum stock level
2) Reorder level
3) Minimum level
4) Average level ,and
5) Danger Level

27. 1.Maximum level: It is the quantity of material beyond which a firm should not
exceed its stocks. If the quantity exceeds the maximum level limit then it will be
termed as overstocking. A firm avoids overstocking because it will result in high
material costs.
Overstocking will lead to the requirement of more capital, more space for
storing the materials, and more charges of losses from obsolescence. It ensures
that the stocks will not exceed this limit even if there may be low demandfor
materials and quick delivery from the supplier.
Maximum level= Reorder level + EOQ - (Minimum Consumption x Minimum
reorder period)

28. 2. Reorder Level: When the quantity of materials reaches a certain level then
fresh order is sent to procure materials again. The order is sent before the
materials reach the minimum stock level.
The reordering level is fixed between the minimum level and maximum
level. The rate of consumption, the number of days required to replenish the
stocks, and the maximum quantity of materials required on any day are taken into
consideration while fixing the reordering level.
Reorder level = Maximum Consumption x Maximum reorder period

29. 3. Minimum level:
This is also called as Safety stock level. This represents the quantity that must be
maintained in hand at all times. If stocks are less than the minimum level, then the work
will stop due to a shortage of materials.
This level is possible to be maintained at a fixed level after taking into
consideration the rate of consumption and the time required to acquire sufficient
material to avoid dislocation of production.
In normal working condition, stock should not be allowed to fall below this level as it
would lead to Danger level.
Minimum stock level= Reorder level- ( Avg. consumption x Avg. reorder period)

30. 4. Danger Level:
This is the level below the minimum stock level. When a stock reaches this
level, immediate action is needed to take for the replacement of stock. If the stock
is reached at this level, the normal lead time is not available, and hence regular
purchase procedure can not be adopted. This may result in high-cost remedial
action only. If this is fixed below the re-order level and above the minimum level,
it will be possible to take preventive action.
Danger level = (Average rate of consumption)×Urgent supply time

31. 5. Average Level: It is the level of an average of minimum level and Maximum
level. It means the average level is maintained in states.
Average stock level = (Maximum level + Minimum level)/2

32. 1. Calculate minimum stock level, maximum stock level, and re-ordering
level, average stock level:
(i) Maximum Consumption = 300 units per day
(ii) Minimum Consumption = 180 units per day
(ii) Normal Consumption =190 units per day
(iv) Reorder period = 10-15 days
(v) Reorder quantity = 2,000 units
(vi) Normal reorder period = 13 days.

33. 2. In a factory component A is used as follows:
Normal usage – 50 kg per week, Minimum usage – 25 kg per week, Maximum usage – 75 kg
per week, Re-order quantity 300 kg, Re-order period 4 to 6 weeks.
Calculate for component A:
a) Re-order level
b) Maximum level
c) Minimum level and
d) Average stock level