Controlling Food Costs in Purchasing
and Receiving
5
OH 5-1
5-1
 Controlling Foodservice Costs
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 5-2
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 5-3
Who Purchases?
 Purchasing agent
 Manager
 Chef
 Head cook
 Trusted staff member
 The buyer maintains quality standards!
OH 5-4
Who Purchases? continued
The buyer is responsible for ensuring that quality standards
are met during the purchasing and delivery process.
OH 5-5
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
OH 5-6
 Identifies the desired
variety
 Identifies packing
requirements
 Details delivery
requirements
 Explains payment
terms
The Food Specification continued
 Specifications should
describe exactly what
buyers want to buy.
OH 5-7
Purchase Orders
 The official written record of the items the buyer
wants to purchase
OH 5-8
Purchase Order Information
 A unique
 The supplier’s
 The name and
 Date of delivery
identification number
address of the
restaurant
 The name, quantity,
 Date of the order
and delivery unit of
each item ordered
 Signature of the
 Total (extended) cost
buyer
OH 5-9
contact information
of the order
Purchase Methods
OH 5-10

Competitive quotes

Cost-plus

Standing order

Sealed bids

One-stop shop

Commissary
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 5-11
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 5-12
AP vs. EP Form
Items, such as fresh whole fish, will weigh much
less in their EP form than in their AP form.
OH 5-13
Calculating EP Cost
 Two steps
 Step 1 – Calculate product’s yield percentage.
Edible portion
÷
(EP) weight
8.00
OH 5-14
÷
As purchased
(AP) weight
=
EP percentage
9.5
=
0.842 or 84.2%
Calculating EP Cost continued
 Step 2 – Calculate EP cost.
 Example—the EP cost of one pound of onions
OH 5-15
As purchased
(AP) price
÷
$0.39/lb AP
÷
Edible portion
=
(EP) percentage
0.842
=
Edible portion
(EP) cost
$0.46/lb EP
Other Factors Affecting Purchasing
 Management
complacency
 Payment history
 Gift acceptance
policies
OH 5-16
When to Buy
 Purchase perishable items daily or every few
days.
 Purchase nonperishable items weekly or
monthly.
OH 5-17
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 5-18
Nonperishable Quantity to Purchase
OH 5-19

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
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
10
OH 5-20
÷
÷
Yield
= AP amount to purchase
percentage
0.842
=
11.87, or 11.9
Catering Purchases
 Step 1 – Determine the servings per purchasing
unit (SPU).
Purchasing
÷ Portion size =
unit
OH 5-21
Servings per
purchasing unit (SPU)
Catering Purchases continued
 Step 2 – Determine the purchase factor.
SPU
x
EP
= Purchase factor (PF)
percentage
 Recall the formula for EP percentage.
Edible portion
As purchased
÷
=
(EP) weight
(AP) weight
OH 5-22
EP
percentage
Catering Purchases continued
 Step 3 – Determine the amount to purchase.
Number of guests
to serve
OH 5-23
÷
Purchase factor
=
(PF)
Amount to
purchase
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 5-24
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 5-25
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 5-26
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.
B.
C.
D.
4.
OH 5-27
AP percentage
AP cost
EP cost
EP percentage
A butcher’s test is a test of (yield/quality).
Key Term Review
 As served (AS)
 Competitive quotes
 Butcher test
 Cost plus
 Buyer
 Invoice
 Commissary
OH 5-28
Key Term Review continued
 Market quotation
sheet
 Nonperishable goods
 One-stop shop
 Par stock
OH 5-29
 Perishable goods
 Purchase order
 Quotes
Key Term Review continued
OH 5-30
 Sealed bid
 Yield chart
 Specification
 Yield percentage
 Standing order
 Yield test
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 5-31
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 5-32
Chapter Learning Objectives—
What Did You Learn? continued
 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.
OH 5-33