OH 5-1

Controlling Food Costs in Purchasing and Receiving

Controlling Foodservice Costs

5OH 5-1

OH 5-2

Chapter Learning Objectives

Explain how a specification becomes a control in the purchasing function.

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

Explain various purchasing methods and their effect on the price of goods.

Calculate a yield test that identifies the difference between as purchased (AP) price and edible portion (EP) cost.

Identify factors that affect the purchase price of goods.

OH 5-3

Chapter Learning Objectives continued

Distinguish between perishable and nonperishable goods 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 and yield percent.

Calculate the amount of goods to purchase for catered events.

Calculate a butcher test, or meat yield test.

Describe proper procedures for receiving goods.

OH 5-4

Who Purchases?

Purchasing agent

Manager

Chef

Head cook

Trusted staff member

The buyer maintains quality standards!

OH 5-5

Who Purchases? continued

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

OH 5-6

The Food Specification

Is a control device

Lists the product’s name

Lists its intended use

Identifies the desired brand and grade

Identifies the desired size

Identifies the desired variety

Identifies packing requirements

Details delivery requirements

Explains payment terms

OH 5-7

The Food Specification continued

Specifications should describe exactly what buyers want to buy.

OH 5-8

Purchase Orders

The official written record of the items the buyer wants to purchase

OH 5-9

Purchase Order Information

A unique identification number

The name and address of the restaurant

Date of the order

Signature of the buyer

The supplier’s contact information

Date of delivery

The name, quantity, and delivery unit of each item ordered

Total (extended) cost of the order

OH 5-10

Purchase Methods

Competitive quotes

Standing order

One-stop shop

Cost-plus

Sealed bids

Commissary

OH 5-11

What to Buy

Avoid buying the “cheapest.”

Use purchase specifications.

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

Consider both AP price and EP cost.

OH 5-12

Two Kinds of Costs

As purchased (AP)—the cost of food as delivered to the restaurant

Edible portion (EP)—the cost of food as served to the guest

OH 5-13

AP vs. EP Form

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

OH 5-14

Calculating EP Cost

Two steps

Step 1 – Calculate product’s yield percentage.

Edible portion

(EP) weight÷ As purchased

(AP) weight = EP percentage

8.00 ÷ 9.5 = 0.842 or 84.2%

OH 5-15

Calculating EP Cost continued

Step 2 – Calculate EP cost.

Example—the 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

OH 5-16

Other Factors Affecting Purchasing

Management complacency

Payment history

Gift acceptance policies

OH 5-17

When to Buy

Purchase perishable items daily or every few days.

Purchase nonperishable items weekly or monthly.

OH 5-18

Perishable Product Purchases

1. Determine the amount of product that will be used between deliveries.

2. Count what is on hand.

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

4. The result is the amount to purchase.

(Note: Some managers purchase a small “extra” or “cushion” amount in case sales levels exceed forecasts.)

OH 5-19

Nonperishable Quantity to Purchase

Most common method is par stock method.

Steps

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

2. Before ordering, take inventory.

3. Subtract on hand quantity from par stock quantity.

4. Difference is quantity to order

OH 5-20

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

OH 5-21

Catering Purchases

Step 1 – Determine the servings per purchasing unit (SPU).

Purchasing

unit

÷ Portion size = Servings per

purchasing unit (SPU)

OH 5-22

Catering Purchases continued

Step 2 – Determine the purchase factor.

Recall the formula for EP percentage.

SPU x EP percentage = Purchase factor

(PF)

Edible portion (EP) weight

÷

As purchased (AP) weight = EP

percentage

OH 5-23

Catering Purchases continued

Step 3 – Determine the amount to purchase.

Number of guests to serve

÷

Purchase factor (PF) = Amount to

purchase

OH 5-24

Butcher Test

Also known as “yield test”

Used to determine EP meat costs

Results vary, based upon the AP quality of meat purchased

Measures losses from

Fat removal

Bone removal

Trim and packaging removal

Portioning

OH 5-25

Steps for Receiving

Step 1 – Delivery person brings products to receiving area.

Step 2 – Check products against the purchase order.

Step 3 – Check products against purchase specifications.

Step 4 – Check delivery quantity against the invoice and the purchase order.

OH 5-26

Steps for Receiving continued

Step 5 – Match invoice prices to purchase order prices.

Step 6 – If everything matches correctly, sign the invoice.

Step 7 – Put delivered products in proper storage areas.

Step 8 – Process paperwork in keeping with the operation’s standard operating

policies and procedures.

OH 5-27

How Would You Answer the 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, a restaurant's EP costs can often be lower than its AP costs. (True/False)

3. EP weight divided by AP weight results in A. AP percentageB. AP costC. EP costD. EP percentage

4. A butcher’s test is a test of (yield/quality).

OH 5-28

Key Term Review

As served (AS)

Butcher test

Buyer

Commissary

Competitive quotes

Cost plus

Invoice

OH 5-29

Key Term Review continued

Market quotation sheet

Nonperishable goods

One-stop shop

Par stock

Perishable goods

Purchase order

Quotes

OH 5-30

Key Term Review continued

Sealed bid

Specification

Standing order

Yield chart

Yield percentage

Yield test

OH 5-31

Chapter Learning Objectives— What Did You Learn?

Explain how a specification becomes a control in the purchasing function.

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

Explain various purchasing methods and their effect on the price of goods.

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

OH 5-32

Chapter Learning Objectives—What Did You Learn? continued

Identify factors that affect the purchase price of goods.

Distinguish between perishable and nonperishable goods 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 and yield percent.

OH 5-33

Calculate the amount of goods to purchase for catered events.

Calculate a butcher test, or meat yield test.

Describe the proper procedures for receiving goods.

Chapter Learning Objectives—What Did You Learn? continued