inventory & inflation
DESCRIPTION
Week 6 DiscussionTRANSCRIPT
© 2004, Educational Institute
Chapter 7 Storing and Issuing Controls
Planning and Control for Food and Beverage Operations
Sixth Edition
(464TXT or 464CIN)
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Competencies forStoring and Issuing Controls
1. Identify the objectives of a storage system for food service operations.
2. Explain how an inventory classification system helps food service managers design cost-effective inventory control procedures.
3. Distinguish between “directs” and “stores” in relation to the inventory systems of food and beverage operations.
4. Describe procedures for maintaining product quality during storage.
(continued)
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Competencies forStoring and Issuing Controls
5. Calculate an inventory turnover rate.
6. Distinguish a physical inventory system from a perpetual inventory system.
7. Identify and describe current automated technology applications designed for inventory management.
8. Identify the objectives of issuing systems for food service operations and describe issuing-control procedures.
(continued)
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ABCD Inventory System
Class A—high perishability/high cost per serving• Fresh meats• Fresh fish• Fresh shellfish
Class B—low perishability/high cost per serving• Frozen meats and seafood• Canned meats and seafood• Some frozen fruits and vegetables• Preserved specialty items
(continued)
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ABCD Inventory System
Class C—high perishability/low cost per serving• Fresh poultry• Fresh produce• Dairy products
Class D—low perishability/low cost per serving• Some frozen and canned fruits/vegetables• Spices/seasonings• Condiments• Staples (flour, sugar)
(continued)
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Inventory Systems—Directs and Stores
Directs
• Not entered into storage records
• Not part of inventory system
• Perishables
• Inexpensive
• Purchased frequently
• Immediate use
(continued)
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Inventory Systems—Directs and Stores
Stores
• Entered into storage
• Controlled by minimum/maximum purchasing/inventory system
• Relatively expensive products
• Purchased less often than directs
• Purchased in quantities necessary to rebuild inventory levels
(continued)
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Storage Security Concerns
Identify storage areas.
Determine products for tight control.
Establish procedures.
• Limit access
• Lock storage areas
• Control storeroom key
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Maintaining Quality During Storage
• Issue products in the order received (FIFO inventory rotation).
• Maintain proper temperatures, humidity, and ventilation.
• Establish regular cleaning times and sanitation practices for all storage areas.
• Store products properly (packaging, placement, quantities).
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Inventory Turnover Rate
Average inventory = beginning inventory + ending inventory
2
Inventory turnover rate = cost of food/beverage used
average inventory
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Inventory Valuation—LIFO
Last-In, First-Out• Cost of products most recently added to
inventory (last-in) are the costs assigned when products are issued (first-out).
• Cost-of-sales figures more accurately reflect replacement costs.
• During times of inflation, LIFO tends to create a lower total inventory value because most recent costs are first issued and most recent costs are typically higher than products purchased in the past.
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Inventory Valuation—FIFO
First-In, First-Out
• Oldest costs in inventory are “issued” or assigned first.
• During times of inflation, FIFO tends to create a higher total inventory value because the more recently purchased products with typically the higher costs remain in inventory.
• Inventory valuation affects food costs, taxes, and profitability.
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Objectives of Issuing
• Limit access to storage areas.
• Match items removed from storage with actual production requirements.
• Assess quantities and costs of products removed from storage.