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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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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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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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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

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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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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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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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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