Chap 3

© 2011 John Wiley & Sons Food and Beverage Cost Control, 5th
Edition
Dopson, Hayes, & Miller
Chapter 3
Managing the Cost
of Food

Food and Beverage Cost Control, 5th
Edition
© 2011 John Wiley & Sons
Main Ideas
Part 1
 Menu Item Forecasting
 Standardized Recipes
 Inventory Control
 Purchasing
 Receiving
Part 2
 Storage
 Determining Actual Food Expense
 Technology Tools

Edition
Part 1
Menu Item Forecasting
 Menu item forecasting addresses the questions:
 “How many people will I serve today?”
 “What will they order?”

Edition
Figure 3.1 Menu Item Sales History
Date: 1/1 - 1/5 Menu Items Sold
Menu Item Mon Tues Wed Thurs Fri Total
Week’s
Average
Roast Chicken 70 72 61 85 77 365 73
Roast Pork 110 108 144 109 102 573 115
Roast Beef 100 140 95 121 106 562 112
Total 280 320 300 315 285 1,500 300

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 Popularity index is defined as the percentage of
total guests choosing a given menu item from a list
of alternatives.
Popularity Index =Total Number of a Specific Menu Item Sold
Total Number of All Menu Items Sold

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 Individual menu item forecasting, based on an
item’s individual sales history:
Number of Guests Expected
x Item Popularity Index
= Predicted Number of That Item to Be Sold
 The predicted number to be sold is simply the
quantity of a specific menu item likely to be sold
given an estimate of the total number of guests
expected.

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Figure 3.2 Forecasting Item Sales
Menu Item Guest Forecast PopularityIndex
Predicted Number
to Be Sold
Roast Chicken 300 0.243 73
Roast Pork 300 0.382 115
Roast Beef 300 0.375 112
Total 300

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 Factors influencing number of guests:
 Competition, weather, special events in your
area, facility occupancy, your own promotions,
your competitor’s promotions, quality of
service, and operational consistency.
 Sales histories track only the general trends of an
operation. They are not precise.

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Standardized Recipes
 The standardized recipe controls both the quantity
and quality of what the kitchen will produce.
 It details the procedures to be used in preparing and
serving each of your menu items.

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 Good standardized recipes contain the following:
1. Menu item name
2. Total yield (number of servings)
3. Portion size
4. Ingredient list
5. Preparation/method section
6. Cooking time and temperature
7. Special instructions, if necessary
8. Recipe cost (optional)

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Figure 3.3 Standardized Recipe
Roast Chicken
Special Instructions: Serve with Recipe Yield: 48
Crabapple Garnish (see Crabapple Garnish Portion Size: 1/4 chicken
Standardized Recipe) Portion Cost: See cost sheet
Serve on 10-in. plate
Ingredients Amount Method
Chicken Quarters
(twelve 3-3½-lb.
chickens)
48 ea. Step 1. Wash chicken; check for
pinfeathers; tray on 24 in. x 20 in.
baking pans.
Butter (melted) 1 lb. 4 oz. Step 2. Clarify butter; brush liberally on
chicken quarters; combine all
seasonings; mix well; sprinkle all over
chicken quarters.
Salt 1/4 C
Pepper 2 T
Paprika 3 T Step 3. Roast at 325o
F in oven for 2 1/2
hours, to an internal temperature of at
least 165o
F.Poultry Seasoning 2 t
Ginger 1 1/2 t
Garlic Powder 1 T

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 The following list contains arguments often used
against standardized recipes:
1. They take too long to use.
2. My people don’t need recipes; they know how
we do things here.
3. My chef refuses to reveal his or her secrets.
4. They take too long to write up.
5. We tried them but lost some, so we stopped
using them.
6. They are too hard to read, or many of my
people cannot read English.

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 Reasons for incorporating a system of standardized
recipes include:
1. Accurate purchasing
2. Dietary concerns are addressed-ingredients
identified
3. Accuracy in menu laws-ingredients identified
4. Matching food used to cash sales
5. Accurate recipe costing and menu pricing
6. New employees can be better trained
7. Computerization of a foodservice operation
depends on them

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 When adjusting recipes for quantity (total yield),
two general methods may be employed.
 They are:
1. Factor Method
2. Percentage Technique

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 Factor Method: recipe conversion factor:
 For example, a 50 portion recipe can be converted to
a 125 portion recipe:
125/50=2.5
2.5 is multiplied by each ingredient (except spices)
Yield Desired
Current Yield = Conversion Factor

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Figure 3.4 Factor Method
Ingredient Original
Amount
Conversion
Factor
New Amount
A 4 lb. 2.5 10 lb.
B 1 qt. 2.5 2 ½ qt.
C 1 ½ T 2.5 3 ¾ T

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 The percentage method deals with recipe weight,
rather than with a conversion factor.
Ingredient Weight/Total Recipe Weight=% of Total
then
% of Total x Total Amount Required
= New Recipe Amount

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Figure 3.5 Percentage Method
Ingredient Original
Amount
Ounces % of
Total
Total
Amount
Required
% of
Total
New
Recipe
Amount
A 6 lb. 8 oz. 104 61.9% 300 oz. 61.9% 185.7 oz.
B 12 oz. 12 7.1 300 oz. 7.1 21.3 oz.
C 1 lb. 16 9.5 300 oz. 9.5 28.5 oz.
D 2 lb. 4 oz. 36 21.5 300 oz. 21.5 64.5 oz.
Total 10 lb. 8 oz. 168 100.0 300 oz. 100.0 300.0 oz.

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Inventory Control
 A desired inventory level is simply the answer to the
question, “How much of each needed ingredient
should I have on hand at any one time?”
 Working stock is the amount of an ingredient you
anticipate using before purchasing that item again.
 Safety stock is the extra amount of that ingredient
you decide to keep on hand to meet higher than
anticipated demand.

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Inventory Control
 Inventory levels are determined by a variety of factors:
1. Storage Capacity
2. Item perishability
3. Vendor delivery schedule
4. Potential savings from increased purchase size
5. Operating calendar
6. Relative importance of stock outages
7. Value of inventory dollars to the operator

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Inventory Control
 Do not overload storage capacity. Leads to greater
spoilage and loss due to theft.
 Shelf life is the amount of time a food item retains
its maximum freshness, flavor, and quality while in
storage.
 The cost to the vendor for frequent deliveries will be
reflected in the cost of the goods to the operator.

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Figure 3.6 Shelf Life
Item Storage Shelf Life
Milk Refrigerator 5-7 days
Butter Refrigerator 14 days
Ground Beef Refrigerator 2-3 days
Steaks (fresh) Refrigerator 14 days
Bacon Refrigerator 30 days
Canned Vegetables Dry Storeroom 12 months
Flour Dry Storeroom 3 months
Sugar Dry Storeroom 3 months
Lettuce Refrigerator 3-5 days
Tomatoes Refrigerator 5-7 days
Potatoes Dry Storeroom 14-21 days

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Figure 3.7: Recommended Refrigeration and Freezer Storage Period Maximums
Cold Storage Chart
These short, but safe, time limits will help keep refrigerated food from spoiling or
becoming dangerous to eat. Because freezing keeps food safe indefinitely, recommended
storage times are for quality only.
Product Refrigerator
(40 °F, 4.5 °C)
Freezer (0 °F, -18 °C)
Eggs
Fresh, in shell 3 to 5 weeks Do not freeze
Raw yolks & whites 2 to 4 days 1 year
Hard cooked 1 week Does not freeze well
Liquid pasteurized eggs, egg substitutes
Opened 3 days Does not freeze well
Unopened 10 days 1 year
Mayonnaise
Commercial, refrigerate after opening 2 months Do not freeze
Frozen Dinners & Entrées
Keep frozen until ready to heat — 3 to 4 months
Deli & vacuum-packed products
Store-prepared (or homemade) egg, chicken,
ham, tuna, & macaroni salads
3 to 5 days Does not freeze well
Hot dogs & luncheon meats
Hot dogs
Opened package 1 week 1 to 2 months
Unopened package 2 weeks 1 to 2 months
Luncheon meat
Opened package 3 to 5 days 1 to 2 months
Unopened package 2 weeks 1 to 2 months

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(40 °F, 4.5 °C)
Bacon & Sausage
Bacon 7 days 1 month
Sausage, raw—from chicken, turkey, pork,
beef
1 to 2 days 1 to 2 months
Smoked breakfast links, patties 7 days 1 to 2 months
Hard sausage—pepperoni, jerky sticks 2 to 3 weeks 1 to 2 months
Summer sausage labeled “Keep Refrigerated”
Opened 3 weeks 1 to 2 months
Unopened 3 months 1 to 2 months
Ham, Corned Beef
Corned beef, in pouch with pickling juices 5 to 7 days Drained, 1 month
Ham, canned labeled “Keep Refrigerated”
Opened 3 to 5 days 1 to 2 months
Unopened 6 to 9 months Do not freeze
Ham, fully cooked
vacuum sealed at plant, undated, unopened 2 weeks 1 to 2 months
Ham, fully cooked vacuum sealed at plant,
dated, unopened
“Use-By” date
on package
1 to 2 months
Ham, fully cooked
Whole 7 days 1 to 2 months
Half 3 to 5 days 1 to 2 months
Slices 3 to 4 days 1 to 2 months
Hamburger, ground, & stew meat
Hamburger & stew meat 1 to 2 days 3 to 4 months
Ground turkey, veal, pork, lamb, & mixtures of
them

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(40 °F, 4.5 °C)
Fresh beef, veal, lamb, pork
Steaks 3 to 5 days 6 to 12 months
Chops 3 to 5 days 4 to 6 months
Roasts 3 to 5 days 4 to 12 months
Variety meats—tongue, liver, heart, kidneys,
chitterlings
Pre-stuffed, uncooked pork chops, lamb chops,
or chicken breasts stuffed with dressing
1 day Does not freeze well
Soups & stews
Vegetable or meat added 3 to 4 days 2 to 3 months
Cooked meat leftovers
Cooked meat & meat casseroles 3 to 4 days 2 to 3 months
Gravy & meat broth 1 to 2 days 2 to 3 months
Fresh poultry
Chicken or turkey, whole 1 to 2 days 1 year
Chicken or turkey, pieces 1 to 2 days 9 months
Giblets 1 to 2 days 3 to 4 months
Cooked poultry leftovers
Fried chicken 3 to 4 days 4 months
Cooked poultry casseroles 3 to 4 days 4 to 6 months
Pieces, plain 3 to 4 days 4 months
Pieces covered with broth, gravy 1 to 2 days 6 months
Chicken nuggets, patties 1 to 2 days 1 to 3 months
Pizza, cooked 3 to 4 days 1 to 2 months
Stuffing, cooked 3 to 4 days 1 month

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Inventory Control
 Volume or quantity discounts-savings.
 Costs may include: storage costs, spoilage,
deterioration, insect or rodent infestation or theft.
 The operating calendar plays a large part in
determining desired inventory levels.
 Less than seven days per week
 Closed for seasonal purposes
 Stock Outages

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Inventory Control
 Value of Inventory Dollars
 Over-buy or “stockpile” inventory. An
opportunity cost is the cost of foregoing the next
best alternative when making a decision.
 A state institution that is given its entire annual
budget may find it advantageous to use its purchasing
power to acquire large amounts of inventory at very
low prices-stockpiling.
 Fiscal year is 12 months long but may not follow
the calendar year.

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Inventory Control
 A purchase point is that point in time when an item
should be reordered. This point is typically
designated by one of two methods:
1. As needed (just in time)
2. Par level

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Inventory Control
 As needed, or just in time method of determining
inventory levels.
 Prediction of unit sales
 Sum of the ingredients (from standardized
recipes) necessary to produce those sales.

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Inventory Control
 Par levels-predetermined purchase points.
 Minimum and maximum amounts
 Minimum-working stock
 Safety stock-25% to 50% over
 4+2=6 (purchase point), order 4 to max = 10
 Highly perishable items – as-needed basis
 Longer shelf life – par level

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Purchasing
 Purchasing is essentially a matter of determining the
following:
1. What should be purchased?
2. What is the best price to pay?
3. How can a steady supply be assured?

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Purchasing
 What Should Be Purchased?
 Product specification (spec) – a detailed
description of an ingredient or menu item.
 Communicates in a very precise way with a
vendor so that your operation receives the exact
item requested every time.
 Each menu item or ingredient should have its own
spec.

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Purchasing
 What to include in specs
 Product name or specification number
 Pricing unit
 Standard or grade
 Weight range/size – count
 Processing and/or packaging
 Container size
 Intended use
 Other information such as product yield

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Figure 3.8 Product Specification
Product Name: Bacon; sliced Spec #: 117
Pricing Unit: lb.
Standard/Grade: Select No.1
Moderately thick slice
Oscar Mayer item 2040 or equal
Weight Range: 14 - 16 slices per pound
Packaging: 2/10 lb. Cryovac packed
Container Size: Not to exceed 20 lb.
Intended Use: Bacon, lettuce, and tomato sandwiches
Other Information: Flat packed on oven-proofed paper
Never frozen
Product Yield: 60% Yield

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Figure 3.9 Selected Producer Container Net Weights
Items Purchased Container
Approximate
Net Weight
(lb.)
Apples Cartons, tray pack 40-45
Asparagus Pyramid crates, loose pack 32
Beets, bunched ½ crates, 2 dozen bunches 36-40
Cabbage, green Flat crates (1 ¾ bushels) 50-60
Cantaloupe ½ wirebound crates 38-41
Corn, sweet Cartons, packed 5 dozen ears 50
Cucumbers, field grown Bushel cartons 47-55
Grapefruit, FL 4/5 bushel cartons & wirebound crates 42 ½
Grapes, Table Lugs and cartons, plain pack 23-24
Lettuce, loose leaf 4/5-bushel crates 8-10
Limes Pony cartons 10
Onions, green 4/5-bushel crates (36 bunches) 11
Oranges, FL 4/5-bushel cartons 45
Parsley Cartons, wax treated, 5 dozen bunches 21
Peaches 2-layer cartons and lugs, tray pack 22
Shallots Bags 5
Squash 1-layer flats, place pack 16
Strawberries, CA 12 one-pint trays 11-14
Tangerines 4/5 -bushel cartons 47 ½
Tomatoes, pink and ripe 3-layer lugs and cartons, place pack 24-33

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Purchasing
 Product yield is the amount of product that you will
have remaining after cooking, trimming, portioning
or cleaning.

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Purchasing
 What Is the Best Price to Pay?
 The best price is more accurately stated as the
lowest price that meets the long-term goals of both
the foodservice operation and its vendor.
 Make vs. Buy decisions
 Bid sheet – comparison shopping
 Price comparison sheet – after you have received
bids from your suppliers, you can compare those
bids

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Figure 3.10 Bid Sheet
Vendor: Buyer:
Vendor’s Address: Buyer’s Address:
Vendor’s Telephone #: Buyer’s Telephone #:
Vendor’s Fax #: Buyer’s Fax #:
Vendor’s E-Mail: Buyer’s E-Mail:
Item Description Unit Bid Price
109 Rib, 19-22#, Choice Pound
110 Rib, 16-19#, Choice Pound
112A Ribeye Lip on 9-11#,Choice Pound
120 Brisket, 10-12# Deckle off, Choice Pound
164 Steamship Round, 60#, Square bottom, Choice Pound
168 Inside Round, 17-20#, Choice Pound
184 Top Butt, 9-11#, Choice Pound
189A Tender, 5# Avg. Pound
193 Flank Steak, 2# Avg., Choice Pound
1184b Top Butt Steak, 8 oz., Choice Pound
1190a Tenderloin Steak, 8 oz., Choice Pound
109 Rib, 19-22#, Certified Angus Beef, Choice Pound
123 Short Ribs, 10# Pound
180 Strip, 10-12#, Choice Pound
Bid Prices Fixed From: ______ to ______
Salesperson Signature: _________________________ Date: ____________

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Figure 3.11 Price Comparison Sheet
Vendors Category: Produce
A. Bill’s Produce Date bid: 1/1/
B. Davis Foods
C. Ready Boy
Price Comparison Sheet
Item Description
Unit A B C
Best
Bid
($)
Best
Company
Last
Price
Paid
Lettuce,
Iceberg, 24 ct.
case $9.70 $10.20 $9.95 $9.70 A $9.50
Lettuce, Red
Leaf, 24 ct.
case 10.50 10.25 10.75 10.25 B 10.10
Mushroom,
Button, 10 lb.
bag 15.50 15.75 16.10 15.50 A 15.75
Mushroom,
Portabello, 5 lb.
bag 19.00 19.80 18.90 18.90 C 19.00
Onion, White
medium, 50 lb.
bag 20.25 20.00 20.50 20.00 B 19.80
Pepper, Green
Bell, 85 ct.
case 28.90 29.50 30.10 28.90 A 27.00
Potato, Russet
Idaho, 60 ct.
case 12.75 12.50 12.20 12.20 C 12.85
Reviewed by: M. Hayes

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Purchasing
 Bid sheets and price comparison sheets are a good
place to start.
 Other determining factors: vendor dependability,
quality of vendor service, and accuracy in delivery

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Purchasing
 Minimum order requirement is the smallest order
that can be placed with a vendor who delivers.
 If the minimum order requirement cannot be
met using the lowest prices, then the manager
may have to choose the supplier with the next
highest price to fill a complete order.

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Purchasing
 How can a steady supply be assured?
 Suppliers have a variety of prices based on the
customer to whom they are quoting them.
 It is simply in the best interest of a supplier to give a
better price to a high volume customer.
 Cherry Pickers – how suppliers describe the
customer who gets bids from multiple vendors, then
buys only those items each vendor has “on sale” or
for the lowest price.

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Purchasing
 Slow pay means high pay.
 Vendors can be great source of information related
to new products, cooking techniques, trends and
alternative product usage.

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Purchasing
 One vendor versus many vendors
 Staples and non-perishables are best purchased in
bulk from one vendor.
 Orders for meats, produce, and some bakery
products are best split among several vendors,
perhaps with a primary and secondary vendor in
each category so that you have a second alternative
should the need arise.

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Purchasing
 Ethics have been defined as the choices of proper
conduct made by an individual in his or her
relationships with others.
 Is it legal?
 Does it hurt anyone?
 Am I being honest?
 Would I care if it happened to me?
 Would I publicize my action?
 Kickbacks always hurt the company

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Purchasing
 Daily Inventory Sheet
 Items listed in your storage areas
 Unit of purchase
 Par value
 Columns; on-hand, special order, and order
amount
 All pre-printed on the sheet

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Purchasing
 The par value is listed so that you know how much
inventory you should have in storage at any given
time.
 The amount to be ordered is calculated as follows:
Par Value – On-Hand + Special Order
= Order Amount

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Figure 3.12 Daily Inventory Sheet
Item Description Unit Par
Value
On
Hand
Special
Order
Order
Amount
Hot Wings 15#
IQF Case 6 2 3 7
Babyback Ribs 2-2 ½#
Case 3 1.5 1 3
Sausage Links 96, 1 oz. Case 5
Drummies 2-5#
Case 4
Bologna 10#
avg. Each 3
Beef Pastrami 10#
avg. Each 4
Slice Pepperoni 10#
avg. Each 6
All-Beef Franks 8/1, 10#
Case 7

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Purchasing
 Regardless of your communication method, it is
critical that you prepare a written purchase order,
or record of what you have decided to buy. The
purchase order (PO) should be made out in triplicate
(3 copies.)

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Purchasing
The written Purchase Order form should contain
space for the following information:
Purchase Order Information
Item Name
Spec #, if appropriate
Quantity Ordered
Quoted Price
Extension Price
Total Price of Order
Vendor Information
Purchase Order Number
Date Ordered
Delivery Date
Name of Person who
Placed Order
Name of Person who
Received Order
Delivery Instructions
Comments

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Purchasing
 The advantages of a written Purchase Order are many and
include the following:
1. Written verification of quoted price
2. Written verification of quantity ordered
3. Written verification of the receipt of all goods ordered
4. Written and special instructions to the receiving clerk,
as needed
5. Written verification of conformance to product
specification
6. Written authorization to prepare vendor invoice for
payment

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Figure 3.13 Purchase Order
Vendor: Purchase Order #:
Vendor’s Address: Delivery Date:
Vendor’s Telephone #:
Vendor’s Fax #:
Vendor’s E-Mail:
Item Purchased Spec #
Quantity
Ordered
Quoted
Price
Extended
Price
1.
2.
3.
4.
5.
6.
7.
8.
10.
11.
12.
13.
14.
15.
16.
Total
Order Date: Comments:
Ordered By:
Received By:
Delivery Instructions:

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Figure 3.14 Purchase Order
Vendor: Scooter’s Produce Purchase Order #: 56
Vendor’s Address: 123 Anywhere Delivery Date: 1/3
Vendor’s Telephone #: 999-0000
Vendor’s Fax #: 999-0001
Vendor’s E-Mail: scootersproduce@isp.org
Item Purchased Spec#
Quantity
Ordered
Quoted Price Extended.
Price
1. Bananas 81 30 lb. $ 0.24 lb. $ 7.20
2. Parsley 107 4 bunches 0.80/bunch 3.20
3. Oranges 101 3 cases 31.50/case 94.50
4. Lemons 35 6 cases 29.20/case 175.20
5. Cabbages 85 2 bags 13.80/bag 27.60
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Total $307.70
Order Date: 1/1 Comments:
Ordered By: Joshua David Entered on 1/1
Received By: Transmitted by Joshua David
Delivery Instructions: After 1:00 p.m.

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Receiving
 One individual places the order, while another
individual is responsible for verifying delivery and
acceptance of the product.
 Auditors are individuals responsible for reviewing
and evaluating proper operational procedures. They
can determine the potential for fraud or theft.

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Receiving
 Proper control procedures will minimize theft.
 Proper receiving demands:
1. Proper location
2. Proper tools and equipment
3. Proper delivery schedules
4. Proper training

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Receiving
 The receiving area must be large enough to allow
for checking products delivered against both the
invoice and purchase order.
 Accessibility to equipment required to move
products to their proper storage area and to dispose
of excess packaging is important. Make sure the
area stays free of trash and clutter, as these make it
too easy to hide delivered food items.

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Receiving
 Remember that the delivery person is also a
potential thief.
 The receiving area should be kept extremely clean,
since you do not want to contaminate incoming
food, or provide a carrying vehicle for pests. The
area should be well lit and properly ventilated.
 Receiving clerks should have the following
equipment: scales, wheeled equipment, box cutter,
thermometer, calculator and records area.

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Receiving
 Scales should be of two types; those accurate to the
fraction of a pound, and those accurate to the
fraction of an ounce.
 Some operators demand that deliveries be made
only at certain times; these are called acceptance
hours.
 Refusal hours are the times that operators will not
accept deliveries.

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Receiving
 Receiving clerks should be trained to verify the
following product characteristics: weight, quantity,
quality, and price.
 Receiving clerks should be required to weigh all
meat, fish and poultry delivered, with the exception
of unopened Cryovac (sealed) packages.
 When an item is ordered by weight, it should be
verified by weight.

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Figure 3.15 Ordered
Item Ordered Unit Price Total Ordered Total Price
Hamburger $2.25/lb. 10 lb. $ 22.50
N.Y. Strip Steak 7.00/lb. 20 lb. 140.00
Corned Beef 8.60/lb. 10 lb. 86.00
Total 40 lb. 248.50
Figure 3.16 Delivered
Item Ordered Unit Price Total Delivered Actual Value
Hamburger $2.25/lb. 15 lb. $ 33.75
N.Y. Strip Steak 7.00/lb. 10 lb. 70.00
Corned Beef 8.60/lb. 15 lb. 129.00
Total 40 lb. 232.75

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Receiving
 The counting of boxes, cases, barrels, etc. should be
routine. The counting of individual items in a box,
such as lemons should be done periodically.
 Checking for quality means checking the entire
shipment for conformance to specifications.

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Receiving
 In cases when the vendor is out of the spec item,
clerks must know whether it is management’s
preference to accept a product of higher quality,
lower quality, or no product as a substitute.
 Clerks need to be trained in two areas regarding
pricing: matching PO unit price to invoice unit
price, and verifying price extensions and total.
 When the person responsible for purchasing food
places an order, the confirmed quoted price should
be recorded on the PO.

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Receiving
 When a discrepancy is discovered, management
should be notified immediately.
 If management notification is not possible, both the
driver and the receiving clerk should initial the
“Comment” section of the PO, showing the
difference in the two prices.
 Shorting is the term used in the industry to indicate
that an ordered item has not been delivered as
promised.

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Receiving
 A credit memo is simply a formal way of notifying
the vendor that an item listed on the original invoice
is missing, and thus the value of that item should be
deducted from the invoice total.
 A contract price is simply an agreement between
buyer and seller to hold the price of a product
constant over a defined period of time.
 Extended price is simply the unit price multiplied
by the number of units delivered.

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Figure 3.17 Credit Memo
CREDIT MEMO
Unit Name:
Vendor: Delivery Date:
Invoice #: Credit Memo #:
Correction
Item Quantity Short Refused Price
Credit
Amount
Total
Original Invoice Total:
Less: Credit Memo Total:
Adjusted Invoice Total:
Additional Information:
Vendor Representative:
Vendor Representative Telephone #:
Operation Representative:
Operation Representative Telephone #:

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Receiving
 Never assume extensions are correct because a
computer did them!
 If a supplier consistently shorts your operation, that
supplier is suspect both in terms of honesty and lack
of concern for your operation’s long-term success.
 Training your receiving clerk to assess and evaluate
quality products is a continuous process.

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Receiving
 Some large operations use a receiving record when
receiving food.
 A receiving record generally contains the following
information: name of supplier, invoice number,
item description, unit price, number of units
delivered, total cost, storage area, and date of
activity.
 Receiving reports can be helpful if it is important to
record where items are to be delivered, or have been
delivered.

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Figure 3.18 Hotel Pennycuff
Receiving Report Date: 1/1
Supplier Invoice # Item Unit
Price
# of
Units
Total
Cost
Distribution
A B C D E
Dairy O T-16841 ½ pt.
milk
$ 0. 24 800 $ 192.00 75 600 125 ---
Tom's
Rice
12785 Rice
(bags)
12.00 3 36.00 --- 1 --- 2 -
-
Barry's
Bread
J-165 Rye 0.62 25 15.50 --- 25 --- --- -
-
Wheat 0.51 40 20.40 20 --- 20 --- -
-
White 0.48 90 43.20 40 10 --- 40 -
-
Total
units
958 135 636 145 42 0
Total cost $307.10
Distribution Key: Comments:
A = Coffee Shop D = Storeroom
B = Banquet Kitchen E = Sundry (nonfood items)
C = Direct Use

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Part 2
Storage
 Remember that storage costs money, in terms of the
space for items and the money that is tied up in
inventory items.
 In most establishments, the storage process consists
of four parts: placing products in storage,
maintaining product quality and safety, maintaining
product security, and determining inventory value.

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Storage
 Most often, in foodservice, high perishability
dictates that the same person responsible for
receiving the items is the person responsible for
their storage.
 The two storage methods used are LIFO and FIFO.
 When using the LIFO (last in, first out) method, the
store-room operator intends to use the most recently
delivered product before he or she uses any part of
that same product previously on hand.

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Storage
 FIFO (first in, first out) means that the operator
intends to rotate stock in such a way that product
already on hand is sold prior to the sale of more
recently delivered products.
 FIFO is the preferred storage technique for most
perishable and non-perishable items. Failure to use
FIFO can result in excessive product loss due to
spoilage, shrinkage, and deterioration of quality.

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Figure 3.19 FIFO and LIFO Storage Systems
Oldest Newest
Oldest Newest
Oldest Newest
Newest Oldest
Newest Oldest
Newest Oldest
FIFO LIFO
Figure 3.20 FIFO Stocking System
Tomato Sauce 2/10 Beets 2/10 Egg Noodles 2/18

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Storage
 Some operators require the storeroom clerk to mark
or tag each delivered item with the date of delivery.
 Some operators prefer to go even further when
labeling some products for storage. These operators
date the item and then also indicate the day (or hour)
in which the product should be pulled from storage,
thawed, or even discarded.

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DATE HOUR
PULL
THAW
DISC.
MONDAYMONDAY
Figure 3.21 Product Storage Label

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Storage
 Products are generally placed in one of three major
storage areas: dry storage, refrigerated storage, or
frozen storage.
 Dry storage areas should generally be maintained at
a temperature ranging between 65F and 75F.
 Shelving must be sturdy, easy to clean, and at least 6
inches above the ground to allow for proper
cleaning beneath the shelving and to ensure proper
ventilation.

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Storage
 Dry goods should never be stored directly on the
floor. Labels should face out for easy identification.
 Refrigerator temperatures should generally be
maintained between 32F (0C) and 36F (2C).
Refrigerators actually work by removing heat from
the contents, rather than “making” food cold.
 Shelving must be at least six inches off the floor and
slotted to allow for good air circulation.

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Storage
 Freezer temperatures should be maintained between
0F and -10F (-18C and -23C).
 Freezers must be regularly maintained, a process
that includes cleaning inside and out, and constant
temperature monitoring to detect possible improper
operation.

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Storage
 Regardless of the storage type, food and related
products should be stored neatly in some logical
order.
 Food product quality rarely improves with increased
storage time.
 The primary method for ensuring product the
quality of stored products is through proper product
rotation and high standards of storeroom sanitation.

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Storage
 Storage areas are excellent breeding grounds for
insects, some bacteria, and also rodents, so insist on
regular cleaning of all storage areas.
 Both refrigerators and freezers should be kept six to
ten inches from walls to allow for the free
circulation of air.
 Drainage systems in refrigerators should be checked
at least weekly.

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Storage
 In larger storage areas, hallways should be kept
clear and empty of storage materials or boxes.
 Some employee theft is impossible to detect – eating
on the job (grape).
 Make it difficult to remove food from storage
without authorization.

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Storage
 Most foodservice operators attempt to control access
to the location of stored products.
 It is your responsibility to see to it that the
storeroom clerk maintains good habits in securing
product inventory.
 As a general rule, if storerooms are to be locked,
only one individual should have access during any
shift.

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Storage
 It is not possible to know your actual food expense
without an accurate inventory.
 Issuing is the process of placing products into the
production system.

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Storage
 Valuing, or establishing a dollar value for your
entire inventory is achieved by using the following
inventory value formula:
 Item amount may be determined by counting the
item, as in the case of cans, or by weighing items, as
in the case of meats.
Item Amount x Item Value = Item Inventory Value

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Storage
 If inventory amounts are overstated, or padded
inventory, costs will appear artificially low until the
proper inventory values are determined.
 Either the LIFO or FIFO method determines item
value.
 When the LIFO method is used, the item’s value is
said to be the price paid for the least recent (oldest)
addition to item amount.

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Storage
 If the FIFO method is used, the item value is said to
be the price paid for the most recent (newest)
product on hand.
 FIFO is the more common method for valuing
foodservice inventory.
 The inventory valuation sheet should be completed
each time the inventory is counted.

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Figure 3.22 Inventory Valuation Sheet
Unit Name: Inventory Date:
Counted By: Extended By:
Item Unit Item Amount Item Value Inventory Value
Page Total
Page _______of______

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Storage
 It is recommended that one person takes the actual
physical inventory, and a different person extends
the value of that inventory.
 A physical inventory, one in which the food
products are actually counted, must be taken to
determine your actual food usage.

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Determining Actual Food Expense
 Cost of food sold is the dollar amount of all food
actually sold, thrown away, wasted or stolen. It is
computed as follows:

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Figure 3.23 Formula for Cost of Food Sold
Beginning Inventory
Plus
Purchases
=Goods Available for Sale
Less
Ending Inventory
=Cost of Food Consumed
Less
Employee Meals
=Cost of Food Sold

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 Beginning inventory is the dollar value of all food
on hand at the beginning of the accounting period.
 Purchases are the sum cost of all food purchased
during the accounting period.
 Goods available for sale is the sum of the
beginning inventory and purchases.
 Ending inventory refers to the dollar value of all
food on hand at the end of the accounting period.

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 Cost of food consumed is the actual dollar value of
all food used, or consumed, by the operation.
 Employee meal cost is actually a labor-related, not
food-related cost. Free or reduced-cost employee
meals are a benefit much in the same manner as
medical insurance or paid vacation.
 It is important to note that ending inventory for one
accounting period becomes the beginning inventory
figure for the next period.

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Figure 3.24 Recap Sheet
Cost of Food Sold
Accounting Period: to
Unit Name:
Beginning Inventory $
PLUS
Purchases $
Goods Available for Sale $
LESS
Ending Inventory $
Cost of Food Consumed $
LESS
Employee Meals $
Cost of Food Sold $

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 Food or beverage products may be transferred from
one food service unit to another – kitchen to bar and
vice versa.
 Transfers out of the kitchen are subtracted from the
cost of food sold and transfers into the kitchen are
added to the cost of food sold.

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Figure 3.25 Recap Sheet
Cost of Food Sold
Accounting Period: 1/1 to 1/31
Unit Name: Your Ice Cream Store
Beginning Inventory $ 23,225
PLUS
Purchases $ 39,000
Goods Available for sale $ 62,225
LESS
Ending Inventory $ 27,500
LESS
Transfers Out $ 4,500
PLUS
Transfers In $ 3,775
Cost of Food Consumed $ 34,000
LESS
Employee Meals $ 725
Cost of Food Sold $ 33,275

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 A foodservice operation’s cost of food consumed is
affected by a variety of factors. One such factor
relates to the “source reduction” decisions made by
the operation’s suppliers.
 “Source reduction” is utilized by suppliers to
minimize the amount of resources initially required
to package, store and ship the items they sell. The
result of effective source reduction is a lessened
impact on the environment and lower product costs

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 The formula used to compute actual food cost
percentage is as follows:
Cost of Food Sold
Food Sales = Food Cost%

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 Food Cost % represents that portion of food sales
that was spent on food expenses.
 The physical inventory may be taken as often as
desired to estimate the daily cost of food sold.

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 Six-column form used to estimate food cost % on a
daily or weekly basis.
Six Column Food Cost % Estimate
1. Purchases Today
Sales Today = Cost % Today
2. Purchases to Date
Sales to Date = Cost % to Date

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Figure 3.26 Six-Column Form
Date:
Weekday Today To Date Today To Date Today To Date

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Figure 3.27 Six-Column Food Cost Estimate
Date: 1/1–1/7
Sales Purchases Cost %
Weekday Today To Date Today To Date Today To Date
Monday $ 850.40 $ 850.40 $1,106.20 $1,106.20 130.0% 130.0%
Tuesday 920.63 1,771.03 841.40 1,947.60 91.4 110.0
Wednesday 1,185.00 2,956.03 519.60 2,467.20 43.8 83.5
Thursday 971.20 3,927.23 488.50 2,955.70 50.3 75.3
Friday 1,947.58 5,874.81 792.31 3,748.01 40.7 63.8
Saturday 2,006.41 7,881.22 286.20 4,034.21 14.3 51.2
Sunday 2,404.20 10,285.42 0 4,034.21 0 39.2
Total 10,285.42 4,034.21 39.2

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Technology Tools
 This chapter focused on managing food-related
costs by controlling the areas of purchasing,
receiving, storage, and issuing.
 There are a variety of software programs that are
available that can assist in these areas such as:
1. Recipe Software can maintain and cost standardized
recipes as well as maintain and supply dietary
information by portion.
2. Menu Programs can create and print physical menus
and even produce purchase orders based on selected
menus.

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Technology Tools
3. Purchasing Software can compare bids and make
purchase recommendations based on best cost/best
value.
4. Receiving Software can prepare a daily receiving
report and maintain receiving histories.
5. Storage/Inventory Assessment Programs can
maintain product inventory values by food category and
even compute LIFO or FIFO inventory values.
6. Cost of Goods Sold Programs can compare forecasted
to actual cost of goods sold as well as well as maintain
employee meal records.

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Summary
Part 1
 Menu Item Forecasting
 Standardized Recipes
 Inventory Control
 Purchasing
 Receiving
Part 2
 Storage
 Determining Actual Food Expense
 Technology Tools

Chap 3

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