CostControl Final.ppt

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    OH 5-1

    Controlling Food Costs in Purchasingand Receiving

    Controlling Foodservice Costs

    5

    OH 5-1

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    OH 5-2

    Chapter Learning Objectives

    Explain how a specification becomes a control in thepurchasing function.

    Explain the parts of a purchase specification and apurchase order.

    Explain various purchasing methods and their effect onthe price of goods.

    Calculate a yield test that identifies the difference

    between as purchased (AP) price andedible portion (EP) cost.

    Identify factors that affect the purchase price of goods.

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    OH 5-3

    Chapter Learning Objectives continued

    Distinguish between perishable and nonperishablegoods and their relationship to the purchasing cycle.

    Calculate the par stock amount of an item to order.

    Calculate the amount to purchase, using EP amount andyield percent.

    Calculate the amount of goods to purchase forcatered events.

    Calculate a butcher test, or meat yield test.

    Describe proper procedures for receiving goods.

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    OH 5-4

    Who Purchases?

    Purchasing agent

    Manager

    Chef

    Head cook

    Trusted staff member

    The buyer maintains quality standards!

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    OH 5-5

    Who Purchases? continued

    The buyer is responsible for ensuring that quality standardsare met during the purchasing and delivery process.

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    OH 5-6

    The Food Specification

    Is a control device

    Lists the productsname

    Lists its intended use

    Identifies the desired

    brand and grade

    Identifies the desiredsize

    Identifies the desiredvariety

    Identifies packing

    requirements

    Details deliveryrequirements

    Explains paymentterms

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    The Food Specification continued

    Specifications shoulddescribe exactly whatbuyers want to buy.

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    Purchase Order Information

    A uniqueidentification number

    The name andaddress of therestaurant

    Date of the order

    Signature of thebuyer

    The supplierscontact information

    Date of delivery

    The name, quantity,and delivery unit ofeach item ordered

    Total (extended) costof the order

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    Purchase Methods

    Competitive quotes

    Standing order

    One-stop shop

    Cost-plus

    Sealed bids

    Commissary

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    What to Buy

    Avoid buying the cheapest.

    Use purchase specifications.

    Buy at the best cost from sellers who meet orexceed the purchase specifications.

    Consider both AP price and EP cost.

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    Two Kinds of Costs

    As purchased (AP)the cost of food asdelivered to the restaurant

    Edible portion (EP)the cost of food as servedto the guest

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    AP vs. EP Form

    Items, such as fresh whole fish, will weigh muchless in their EP form than in their AP form.

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    OH 5-14

    Calculating EP Cost

    Two steps

    Step 1Calculate products yield percentage.

    Edible portion(EP) weight

    As purchased(AP) weight

    = EP percentage

    8.00 9.5 = 0.842 or 84.2%

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    Calculating EP Cost continued

    Step 2

    Calculate EP cost.

    Examplethe EP cost of one pound of onions

    As purchased(AP) price

    Edible portion(EP) percentage

    =Edible portion(EP) cost

    $0.39/lb AP 0.842 = $0.46/lb EP

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    OH 5-16

    Other Factors Affecting Purchasing

    Managementcomplacency

    Payment history

    Gift acceptancepolicies

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    OH 5-17

    When to Buy

    Purchaseperishableitems daily or every fewdays.

    Purchase nonperishableitems weekly ormonthly.

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    Perishable Product Purchases

    1. Determine the amount of product that will beused between deliveries.

    2. Count what is on hand.

    3. Subtract the amount on hand from the amountthat will be used.

    4. The result is the amount to purchase.

    (Note: Some managers purchase a small extra or cushionamount in case sales levels exceed forecasts.)

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    Nonperishable Quantity to Purchase

    Most common method is par stock method.

    Steps

    1. Determine quantity (par stock) that must be onhand between orders for each item.

    2. Before ordering, take inventory.

    3. Subtract on hand quantity from par stockquantity.

    4. Difference is quantity to order

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    Calculating How Much to Buy

    Need ten pounds of onions.

    Yield percentage of onions is 84.2%.

    How many pounds will you buy?

    EP amount

    needed

    Yield

    percentage= AP amount to purchase

    10 0.842 = 11.87, or 11.9

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    OH 5-21

    Catering Purchases

    Step 1

    Determine the servings per purchasingunit (SPU).

    Purchasingunit

    Portion size =Servings perpurchasing unit (SPU)

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    Catering Purchases continued

    Step 2

    Determine the purchase factor.

    Recall the formula for EP percentage.

    SPU xEPpercentage

    = Purchase factor (PF)

    Edible portion(EP) weight

    As purchased(AP) weight

    = EPpercentage

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    Catering Purchases continued

    Step 3

    Determine the amount to purchase.

    Number of gueststo serve

    Purchase factor(PF)

    = Amount topurchase

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    OH 5-24

    Butcher Test

    Also known as yieldtest

    Used to determineEP meat costs

    Results vary, basedupon the AP quality

    of meat purchased

    Measures losses from

    Fat removal

    Bone removal

    Trim and packagingremoval

    Portioning

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    OH 5-25

    Steps for Receiving

    Step 1

    Delivery person brings products toreceiving area.

    Step 2Check products against the purchaseorder.

    Step 3Check products against purchasespecifications.

    Step 4Check delivery quantity against theinvoice and the purchase order.

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    Steps for Receiving continued

    Step 5

    Match invoice prices to purchase orderprices.

    Step 6If everything matches correctly, sign

    the invoice.

    Step 7Put delivered products in properstorage areas.

    Step 8

    Process paperwork in keeping with theoperations standard operating policiesand procedures.

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    OH 5-27

    How Would You Answerthe Following Questions?

    1. A purchase order is best prepared by the (buyer/seller) of the items to be purchased.

    2. With effective purchasing techniques in place, arestaurant's EP costs can often be lower than its AP

    costs. (True/False)

    3. EP weight divided by AP weight results in

    A. AP percentage

    B. AP cost

    C. EP cost

    D. EP percentage

    4. A butchers test is a test of (yield/quality).

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    Key Term Review

    As served (AS)

    Butcher test

    Buyer

    Commissary

    Competitive quotes

    Cost plus

    Invoice

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    OH 5-29

    Key Term Review continued

    Market quotationsheet

    Nonperishable goods

    One-stop shop

    Par stock

    Perishable goods

    Purchase order

    Quotes

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    Key Term Review continued

    Sealed bid

    Specification

    Standing order

    Yield chart

    Yield percentage

    Yield test

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    Chapter Learning ObjectivesWhat Did You Learn?

    Explain how a specification becomes a control inthe purchasing function.

    Explain the parts of a purchase specification andof a purchase order.

    Explain various purchasing methods and theireffect on the price of goods.

    Calculate a yield test that identifies thedifference between AP price and EP cost.

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    Chapter Learning ObjectivesWhat Did You Learn? continued

    Identify factors that affect the purchase price ofgoods.

    Distinguish between perishable and

    nonperishable goods and their relationship tothe purchasing cycle.

    Calculate the par stock amount of an item to

    order.

    Calculate the amount to purchase, using EPamount and yield percent.

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    Calculate the amount of goods to purchase forcatered events.

    Calculate a butcher test, or meat yield test.

    Describe the proper procedures for receivinggoods.

    Chapter Learning ObjectivesWhat Did You Learn? continued