CHAPTER 3

PART ONE PART TWO

• MENU FORECASTING • RECEIVING
• STANDARDIZED RECIPES • STORAGE
• INVENTORY CONTROL • DETERMINING ACTUAL
• PURCHASING FOOD

EXPENSE
• TECHNOLOGY TOOLS
 Menu Item Forecasting

Menu Item Forecasting is needed to make food

item production decisions, prevents wastage and
also enables you to allocate the resources, such
as staff or stock materials required to meet the
demand. Restaurant menu forecasting plays a
critical role in controlling food costs by
preventing wastage.
Date1/1-1/5 Menu Items Sold
Menu Item Mon Tues Wed Thurs Fri Total Week’s
Average
Roast 70 72 61 85 77 365 73
Chicken
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

 Standardized
Recipe
It Controls both the quantity and
the quality of what kitchen will
produce.
 Good Standardized recipe consist the
following information.
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)

 Roast Chicken
Special Instructions: Serve With Recipe Yield: 48
Crabapple Garnish: (See Crabapple Garnsih) Portion Size: ¼ chicken
Standardized Recipe Portion Cost: See Cost Sheet
Serve on 10-in plate.
Ingredients Amount Method
Chicken Quarters 48 ea Step 1. Wash chicken: check for pinfeathers:
Twelve 3-3 ½ lb Tray on 24 in. X 20 in baking pans.
Chickens
Butter (melted) 1 lb 4 oz.
Step 2 Clarify butter: brush liberally on chicken
quarters: combine all seasonings: mix well
Salt ¼C Sprinkle all over chicken quarters.

Pepper 2T

Paprika 3T

Poultry Seasoning 2t

Ginger 1½t
Step 3 Roast at 320ºF in oven for 2 ½ hours
To an internal temperature of at least 165ºF.
Garlic Powder 1T
When Adjusting recipes for quality
(total yield), Two general methods
may be employed:

1.Factor Method

2. Percentage Technique
 Factor Method
When using the factor method, you utilize the following formula to arrive at a
recipe conversion factor:

Yield Desired
Current Yield = Conversion Factor

If, For example our current recipe makes 50 portions and the number of portions we
wish make is 126 the formula would be as follows.

125 = 2.5
50

Thus 2.5 would be the conversion factor. To produce 125 portions we would multiply each
ingredient in the recipe by 2.5 to arrive at the required amount of that ingredient. Figure
3.4 Illustrates the use of this method for a three ingredient recipe.
 Percentage Method

Deals with recipe weight rather

than with a conversion factor. It
sometimes more accurate than
using a conversion factor alone.
Ingredient Original Ounces % of Total Total Amount % of Total New Recipe
Amount Required 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

Inventory Control also known as stock
control- It can be broadly defined as
"the activity of checking a shop's
stock". It is the process of ensuring that
the right amount of supply is available
within a business
DETERMINING INVENTORY LEVELS Inventory
levels are determined by a variety of factors. Some of the
important ones as follows:

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.
 Determining Actual Food Expense
Determining your revenue figure from your sales history and all food
expenses by adding the dollar value of all properly corrected delivery
invoices that you accumulated for the month. And determining the
totaled value of all food purchased and delivered between the first day
down to the last day of month.
For Example; If you had more food products on the last day of
January which is on 31 than you had the first day of January, then
your food expense is less than $39,000. If you have fewer products in
your inventory on the last day of January than you had in the first day
of January, then your cost of food expense is higher than $39,000
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
Beginning Inventory-Is the dollar value of all food on hand at the beginning of the accounting period. It is determined by
completing ab actual count and variation of your food inventory.
Purchases- are the sum cost of all food purchased during the accounting period. Purchases are determined by adding all
properly tabulated invoices for the accounting period.
Goods Available for Sale-is the sum of the beginning inventory and purchases. It represents the value of all food that
was available for sale during the accounting period.
Ending Inventory-Refers to the dollar value of all food on hand at the end of the accounting period. It also
determined by completing a physical inventory.
Cost of food Consumed-is the actual dollar value of all food used, or consumed, by the operation. It is
important to note that it is not merely a value of food sold but the value of all food no longer in the
establishment including the value of food (meals) eaten by employees.
Employee meals cost- (Note that the value of benefits provided by a certain company to their employees
like free or reduced-cost employee meals same manner as medical insurance or paid vacation should not
be charged as cost of food but cost of labor). The dollar value of food eaten by employees is subtracted
from the cost of food consumed to yield the cost of food sold.
Cost of food sold- is the actual dollar value of all food expenses incurred by the operation except for those
related to employee meals. To determine the cost of food sold, use the exact formula when analyzing cost
of food sold and compute the actual food cost. Note that the Beginning inventory should be taken at the
start of the accounting period as well as the Ending Inventory. Perform both the counting and price
extension process to develop actual inventory valuations.
VARIATION ON THE BASIC COST OF FOOD
SOLD FORMULA
The format most commonly used to determine cost of
food sold, but some operators use different formulas,
depending on the unique aspects of their units. The
important point to remember that all of these formulas
should seek to accurately reflect actual food cost sold
by the operations for a given time period. Two
variation formula below:
FOOD&BEVERAGE PRODUCTS ARE TRANSFERRED FROM ONE FOOD
SERVICE UNIT TO
ANOTHER (When an operator seeks to compute one cost of food sold figure for a bar and
another for the
bar’s companion restaurant, like fruits, juices, vegetables, and similar items that are taken from
the kitchen for use in the bar, whereas wine, sherry, and wine are taken from the bar for use in the
kitchen. The formula for cost of food sold in this situation would be as follows):
Beginning Inventory $ Plus
Purchases$

= Goods Available for Sale Less

Ending Inventory $
= Cost of Food Consumed Less
Employee Meals $
= Cost of food sold Value of Transfers in
=Cost of food consumed $ Employee Meals
=Cost of food sold $
NO EMPLOYEE MEALS ARE PROVIDED (when an operation won’t
provide employee meals at all, the computation format of cost of food sold
would be as follows:

Beginning Inventory $ Plus

Purchases $
Goods Available Sale $
for

Less

Ending Inventory $

Cost of Food Sold $

It is important to know exactly the formula when analyzing cost of food sold, it
can make a big difference in the interpretation of the cost information. It is
critical that accurate beginning and ending inventory figures in one accounting
period to determine accurate cost of food sold.
Example:
(Note that all food consumed by employees
should be accounted as employee meals for
the purpose of computing cost of food sold.
Records are kept on actual number of
employees eating per day, monthly employee
meal cost to determine the cost easily.)
(It is important to note that the ending inventory for one accounting period becomes
the beginning inventory figure for the next period. For example; in the case of your Ice
cream store, on the January 1 is the ending inventory figure as the new accounting
period of February 1 beginning inventory figure which is $27,500.)
 In order for the six-column food cost to be an accurately estimated, make one important
assumption for any time period you are evaluating, the beginning and ending inventory
amount are the same. If you assume your inventory is constant, your food cost sold for
the one-week period is a little less than
$4,034.21/ 39.20% of sales as shown above the table. Why is it a little less? because we
subtract the value of employee meals considered as employee benefit not a food expense.

How accurate is the six-column form?

-It keeps records both sales history and purchasing pattern.
-It identifies the problems before the end of the monthly accounting period.
-By the 9th-10th day, the degree of accuracy in the TO DATE COLUMN is very high
-And a daily reminder to both management and employees that there is a very definite
relationship between sales and expenses.
(Note that the control of food expense is critical to all food service operations. From
purchasing raw ingredient to its receiving, and storage, maintaining and checking the proper
quality and quantity of product on hand at all times. Food represents a large part of your
overall expense budget. A proper operation safeguard and accounting are extremely
important in managing and controlling overall cost.)
PLACING PRODUCTS IN STORAGE
Food products are highly perishable items. This is especially true for
refrigerated and frozen items. An item such as ice cream, for example,
can deteriorate substantially if it is at room temperature for only a
few minutes. Most often in food service, this high perishability dictates
that the same individual responsible for receiving the items is the
individual responsible for their storage. They were delivered in
accordance with the purchase order and now must be put away. Store
raw products below cooked or ready-to-eat products. Develop and
follow a FIFO system for refrigerated food. Designate areas in the
refrigerator for certain items, and keep only those items in their
designated place. Never put hot foods in the refrigerator unless
absolutely necessary.
 
LIFO SYSTEM
Last in, first out (LIFO) is a method used to account for inventory
that records the most recently produced items as sold first. Under
LIFO, the cost of the most recent products purchased (or produced)
are the first to be expensed as cost of goods sold (COGS), which
means the lower cost of older products will be reported as inventory.
When using the LIFO storage system, the storeroom operator intends
to use the most recently delivered product (last in) before he or she
uses any part of that same product previously on hand. In all cases ,
you must strive to maintain a consistent product standard. In the case
of some bread, pastry, fruit, and vegetables items, the storeroom clerk
could be intructed to utilize the LIFO system. Cost can rise
dramatically when older LIFO items must eventually be discarded or
used in a way that reduces their revenue producing ability.
Here is what it’s been costing Brad to build up his
inventory:
 
Month Amount Price Paid
Nov 7 100 books $18.00 per
Nov 21 100 books $18.00 per
Nov 28 125 books $18.25 per
Dec 4 150 books $18.50 per
Dec 7 150 books $19.25 per
Dec 15 150 books $20.00 per
 
FIFO SYSTEM
First In, First Out, commonly known as FIFO, is an asset-management and
valuation method in which assets produced or acquired first are sold, used, or
disposed of first. The FIFO method is used for cost flow assumption purposes. In
manufacturing, as items progress to later development stages and as finished
inventory items are sold, the associated costs with that product must be
recognized as an expense. Under FIFO, it is assumed that the cost of inventory
purchased first will be recognized first. The dollar value of total inventory
decreases in this process because inventory has been removed from the
company’s ownership. The costs associated with the inventory may be calculated
in several ways—one being the FIFO method.
Example of FIFO
Imagine if a company purchased 100 items for $10 each, then later purchased
100 more items for $15 each. Then, the company sold 60 items. Under the FIFO
method, the cost of goods sold for each of the 60 items is $10/unit because the
first goods purchased are the first goods sold.
DRY STORAGE
The term dry storage refers to the storing of items which don't
require a climate controlled environment. Items set in dry
stockpiling by and large have a long time span of usability, also
known as a long shelf life. To encounter food items that require dry
storage, simply take a peek in your pantry, cupboard, or cabinets.
Items such as peanut butter, potato chips, rice, and canned
vegetables (such as canned corn or green beans) are items which do
not require a climate controlled area. Restaurants and fast-food
establishments use dry storage when storing items like large cans of
vegetables and cooking items like flour and sugar.
Example, cereals, flour, rice, dried pasta, fruit and vegetables, tinned
products and packaged foods.
REFRIGERATED STORAGE
Refrigeration slows down the chemical and biological processes in
foods and the accompanying deterioration and the loss of quality.
The storage life of fresh perishable foods such as meats, fish,
fruits, and vegetables can be extended by several days by cooling,
and by several weeks or months by freezing. There are many
considerations in the design and selection of proper refrigeration
and heat transfer mechanisms, and this chapter demonstrates the
importance of having a broad base and a good understanding of
the processes involved when designing heat transfer equipment.
Refrigerated Products
The most basic rule must be always followed: store raw products
below, never above, your cooked or ready-to-eat products. Keep
foods 4°C (39°F) or colder, the safe temperature for refrigerated
storage.
Always store raw food in sealed or covered containers at the
bottom of the fridge. Keep raw foods below cooked foods, to
avoid liquid such as meat juices dripping down and
contaminating the cooked food
 
For example, fruits and vegetables continue to respire and
generate heat during storage; most foods freeze over a range of
temperatures instead of a single temperature; the qual- ity of
frozen foods is greatly affected by the rate of freezing; the velocity
of re- frigerated air affects the rate of moisture loss from the
products addition to the rate of heat transfer, and so forth.
FREEZING STORAGE
Freezers should be kept at a temperature of 0°F or lower. The food,
color, flavor and texture will be retained best if the product is
frozen in peak condition. When foods are frozen quickly, fewer ice
crystals form. If foods have large ice crystals, they will affect
quality when thawed. Ideally, food items 2 inches thick should
freeze in 2 hours. When you are adding a quantity of food, turn
down the dial to ensure a colder freezer. Lay packages out on other
frozen items to freeze quickly. Allowing air to circulate around
packages will ensure quick freezing for best quality. Once items are
frozen, they may be stacked.
Examples: Water turning into ice when the temperature drops
below 0˚C is an example of freezing. Liquid lava turning into solid
rock when it cools is called solidifying.
STORAGE BASICS
Regardless of the storage type, food and related
products should be stored nearly in some logical
order. When a few items constitute a majority of the
sales volume in your unit,this can be an effective
storage technique. Regardless of the storage system
you choose, inventory sheets should match the
physical order of items in storage. It is also important
to note that the objective of a neat storage area is to
both maximize storage space and minimize the time it
takes to locate the items in storage.
MAINTAINING PRODUCT QUALITY AND SAFETY
It is a fact that food products quality rarely improves with increased
storage time. Storage areas are excellent breeding ground for insects,
some bacteria, and also rodents. To protect against these hazards, you
should insist on a regular cleaning of all storage areas. Compressor
units on refrigerators and frozen-food holding units should be checked
regularly for the buildup of dust and dirt. Interior storage racks should
be kept free of spills and soil. Refrigerators and frozen-food holding
units remove significant amount of stored product moisturize, causing
shrinkage in meats and produce and freezer burn. Unless they are built
in refrigerators and frozen-food holding units should be high enough of
the ground to allow for easy cleaning around and under them to
prevent cockroaches and other insects from living beneath them.
STORAGE CAPACITY - inventory items must be
purchased in quantities that can be adequately
Storage facilities.

ITEM PERISHABILITY - If all food products had the

same shelf life - that is the amount of time a food item
retains its maximum freshness, flavor, and quality.
 VENDOR DELIVERY SCHEDULE - It is the
fortunate food service operator who lives in a large
City with many vendors , some of whom may offer
the same service and all whom would like to have
the operator's business .

POTENTIAL SAVINGS FROM INCREASED

PURCHASED SIZE - Sometimes you will find that you
can realize substantial savings by purchasing needed items
in large quantities.
OPERATING CALENDAR when an operation is
involved in serving much seven days in a week to a
relative stable number of guest, the operating
calendar makes little difference to inventory level
decision making.
RELATIVE IMPORTANCE OF STOCK
OUTAGES In many foodservice operations,
not having enough of a single food ingredients
or menu item simply not that important.
Example: it may be all right for the local
Frentch Restaurant, It's not dificult to imagine
the problem of the McDonald's restaurant
manager who runs out of French Fried
potatoes on the same Saturday night.
VALUE OF INVENTORY DOLLARS TO THE
OPERATOR In some cases, operator elect to
remove dollars from their bank accounts and
converts them to product inventory.

An opportunity cost is the cost forgoing the next best

alternative when making a decision. Example:
Suppose you have two Choices A and B both having
potential benefits or return for you. •If you choose A,
then you lose potential benefits •if you choosing B
(Opportunity Cost) in other words you could choose to
use your money to buy food inventory.
SETTING THE PURCHASE POINT A purchase point, as it
relatesto inventory levels, is that point in time when an item
should be recorded. This point is typically designated by one of
two methods
1. As needed (just in time)

2. 2. Par level

AS NEEDED -When you elect to use the as-needed, or just-

in-time, method of determining inventory level, you are
basically purchasing food based on your prediction of unit
and the sum of the ingredients (from standardized recipes)
necessary to produce those sales.
PURCHASING Regardless of the method used to determine inventory
levels, once the quantity needed on hand has been determined, you must
turn your attention to the extremely important area of purchasing.
Purchasing is essentially a matter of determining the following.

•What should be purchased?

•What is the best price for you?
•How can a steady supply be ensured?
WHAT SHOULD BE PURCHASED Just as it is not possible to
determine inventory levels or items to be purchased without
standardized recipes. A product specification is simply a derailed
description of an ingredient or menu item.

A foodservice specification generally consists of the following

information.
1. Product name of specification number
2. Pricing unit
3. Standard or grade
4. Weight range/size
5. Processing and/or packaging
6. Container size
7. Intended use
8. Other information such as product yield
PRODUCT NAME This may seem self-explanatory, but,
in reality, it is not. Mangos are a fruit to those in the
southwestern United States but may mean a bell pepper
to those in the Midwest.

PRICING UNIT A pricing unit may be established in

terms of pounds, quarts, gallons, cases or any others
commonly used units.

Example: Is typically sold in the United States by the

bunch.
STANDARD OR GRADE

Many food items are sold with varying degrees of

quality or desirability. Because that is true, the
U.S. Department of Agriculture, the bureau of
fisheries, and the food and drug, Administration
have developed standards for many food items. In
addition, grading programs are many commonly
used foodservice items.
 WEIGHT RANGE/SIZE

Weight Range or size is important when referring

to meats, fish,poultry, and some vegetables.In our
standardized recipe example of roast chicken,the
quarters were to have come from chickens in the 3
to 3 ¹/² - pound range
PROCESSING AND/OR PACKAGING - Processing
and packaging refers to the products stale when you
buy it. apples for example ,may be purchased fresh,
canned or frozen, Each from will carry a price
appropriate for its processed or packaged stale.

CONTAINER SIZE - this term refers to the can size,

number of cans per case or weight of the container in
which the product is delivered.
 INTENDED USE -Different types of the same
items are often used in the same food service
operation but in a variety of ways.

SUPPLIERS HAVE MANY PRICES, NOT JUST ONE. -

Unlike the restaurant business, which tends to hold its
prices steady between menu reprints and generally
charges the same price to all who come in the door,
suppliers have a variety of prices based on the customer
to whom they are quoting them.
SUPPLIERS REWARD VOLUME GUESTS -It is simply in the best interest
of a supplier to give a better price to a high-volume customer .

CHERRY PICKERS ARE SERVICED LAST - Cherry pickers is the term

used by suppliers to describe the customer who gets bids from multiple
vendors and then buy only the items that each vendors has on sale or for the
lowest price.

SLOW PAY MEANS HIGH PAY -Those operators who do not pay their bills
in a timely manner may be surprised to know what their competitors are
paying for similar products. In most cases, operators who are slow to pay will
find that the vendor has decided to add the extra cost of carrying the loan
charges related to their accounts to the price those operators pay for their
products.
ONE VENDOR VS MANY VENDORS -Every operator is faced with
the decision of whether to buy from one vendor or many vendors. In
general, the more vendors there are , the more time must be spent in
ordering, receiving, and paying invoices. Many operators however fear
that if they give all their business to one supplier their costs may rise
with because of a lack of competitions.

PURCHASING ETHICS -Purchasing food products is an area that

can test the ethics or even the most conscientious manager. Ethics have
been defined as the choices of proper conduct made by an individual
in his or her relationships with others. Ethics come into play in a
purchasing products because of the tendency for some suppliers to
seek an unfair advantage over the competition by providing personal
favors to the buyer.
DAILY NVENTORY SHEET

A daily inventory sheet will have the items listed in your

storage areas, their unit of purchased, and their par
values preprinted on the sheet. In addition, the form will
have the following columns: on hand, special order, and
other amount.
PREPARING THE PURCHASE ORDER

Some items are purchase daily, others weekly and some perhaps
monthly. In addition, you may be able to choose, from a variety of ways
to communicate with your supplier, including the internet, via ordering
software provided by your vendors, by fax or by telephone. Regardless
of your communication method, however, it is critical that you prepare
a written purchase order, or record of what you have decided to buy.
Purchase Order Information
1. Item name
2. Spec #, if appropriate
3. Quantity ordered
4. Quoted price per unit
5. Extension price
6. Total price of order
7. Vendor information
8. Purchase order number
9. Date ordered
10. Delivery date
11. Name of person who placed order
12. Name of person who received
order
13. Delivery instructions
14. Comments