INSTITUTE OF HOTEL MANAGEMENT PUSA, NEW DELHI

SUBJECT- FOOD & BEVERAGE MANAGEMENT TOPIC- INVENTORY CONTROL CODE- IHMPUSA/ AKG/ 3RD YEAR STUDENT HANDOUT PHYSICAL INVENTORY/STOCKTAKING:- The main objective of stocktaking is to ascertain the actual value of goods in hand as distinguish from the book value of the stock. It is the process physical counting of all stock items in the store rooms and kitchen. It is carried out by F& B control department of the hotel. In case of food stores it done once in month, for housekeeping item once in two months and for alcoholic beverage and Bar once in 24 hours. It solve the following purpose 1. To determine the value of goods held in stock (to check total value of stock held is in accordance with financial policy the establishments) 2. To compare the value of goods actually in stores with the book value of the stock at the particular time. 3. To list slow moving items. 4. To compare usage with sales to assess food percentage as a deterrent against loss of pilferage. 5. To determine the rate of stock turnover. 6. It provides variance between actual quantities and calculated quantities on hand. Some senior staff or account personnel aided by concerned department staff caries the physical stock. All the goods are recorded on printed stock sheet. Stocking taking should be done on the end of one trading period & when it carried out the movement of goods should not take place. There are two ways of carrying it. PERPETUAL INVENTRY In this system, goods received or issued is immediately recorded on stock taking sheet & compiled at the end of the day. In this system, at any given time you know the value of stock in hand. An individual card is required for each item. All figures are recorded, the balance figure on card should agree with actual count of the item in store room. The following are the advantage of perpetual inventory 1. 2. 3. 4. 5. It indicates the reordering point It controls the overbuying and under buying It provides the constant inventory figure at glance Immediate comparison between actual and book value of items It indicates the slow moving items Hotel ABC Name of ItemRECEIVED ISSUED BALANCE Qty Amt

Date Received Qty Unit Price Amt Date Issued Req. Qty Amt from to No

INSTITUTE OF HOTEL MANAGEMENT PUSA, NEW DELHI

SUBJECT- FOOD & BEVERAGE MANAGEMENT TOPIC- INVENTORY CONTROL CODE- IHMPUSA/ AKG/ 3RD YEAR STUDENT HANDOUT MONTHLY INVENTORY- In most business establishment physical inventories are taken. This is done at the close of accounting period or after the close of business day or monthly. The process of taking a physical inventory requires that one physically count the actual number of units of each items in stock and record that number at appropriate place in the inventory book. Once the quantities are determined for each item, total value also can be calculated for each. One of the principal difficulties with above procedure is determining unit cost of each item, since all purchases are not made at the same time. Hotel ABC Store Room Inventory Month of April May June July Items Qty Price Amt Qty Price Amt Qty Price Amt Qty Price Amt Brought Forward Tomato Paste Tin Almond Pkt 250gms

Rate of Stock Turnover = Cost of food consumed/ Value of Average stock Monthly Food Cost DeterminationOpening Inventory+ Purchase Closing Inventory + Cooking Liquors + transfer from other units (Food to Bar +Transfer to other units + Grease Sales + Steward Sales + Gratis to Bar + Promotion Expenses) Grease Sales- In many establishment, particularly those that butcher meats on premises, raw fat is one of the by product of kitchen operation. Many of these places save the raw fat and sell it to rendering companies, which converts it into industrial fats and oils. The sale results in income to the establishment, which is generally treated as a credit to cost. Steward Sales- In some hotel the employees are permitted to purchase food at the cost from the establishment for their own use. The sale is referred as Steward sale and resulting income is considered as a credit to cost. Gratis to Bar There are many establishment where the kitchen is expected to produce various king of hot and cold hordoeuvres that are given away at the bar to promote the beverage sale. It logical to reflect the cold of hordoeuvres in beverage department cost credit must be given to kitchen for food cost.

INSTITUTE OF HOTEL MANAGEMENT PUSA, NEW DELHI

SUBJECT- FOOD & BEVERAGE MANAGEMENT TOPIC- INVENTORY CONTROL CODE- IHMPUSA/ AKG/ 3RD YEAR STUDENT HANDOUT

PRICING OF ISSUES
In a department there must be a system established so that the department can be fairly charged for what it has requisitioned for its use. The method of pricing the food issued depends mainly on the type of commodities in question. Perishables: In the case of perishable commodities as already stated they frequently go direct to the kitchen as direct issues and priced against the actual purchase price of the commodities. When however a perishable store system is operated the daily issues can be more effectively controlled and a much more accurate gross profit calculated for each day some discrepancy do occur under this method at times, e.g. the butchery department will draw food items from the stores, manufacture them into a processed item and returned it to the stores to be issued at a later date. The method of costing here must be clearly worked out, as often central butchery departments are required to be self supporting and also the purchasing officer and food and beverage manager having previously decided it was cheaper and more efficient to have a butchery department in the establishment, require to measure then previous make or buy decision at periodic intervals. Perishables food may be priced out of in any methods by which non-perishables and be priced in some instants the method used would be restricted to large establishment because of high degree of skill necessary to install and control. Non-perishables: In this case, one of several different methods may be adopted. 1. Actual Purchase Price: This may be applied to items, which are in frequent purchase, and of which only a small stock is held and also for slow moving items e.g. items costing Rs. 5/- each are issued at Rs. 5/- each. 2. Simple Average Price: This may be applied to items, which have a fluctuating market price. When a new purchase is made a new average price should be calculated e.g. 10 times are purchased in a week at Rs. 5/- each and a similar 12 items are purchased in week 2 at Rs. 4/- each. If any of the 22 items in stock were to issue they would be at Rs. 4.5/- each. 3. Weighted Average Price: This is a more accurate method which is sometime used, the quantities are taken into account as well as the price, thus giving a more accurate average price. E.g. 10kg at Rs. 15/= Rs. 150/20kg at Rs. 20/= Rs. 400/Total 30kg = Rs. 550/WAP 550kg/30 = Rs. 18.3/4. Inflated Price: Here the goods are issued at cost plus, say 10 or 15 % to recover the cost of handling and storage charged. 5. Standard Price: A Standard Price is to decide on for a given period, usually 3-6 months and the positive and negative variances recorded when purchases vary in price

INSTITUTE OF HOTEL MANAGEMENT PUSA, NEW DELHI

SUBJECT- FOOD & BEVERAGE MANAGEMENT TOPIC- INVENTORY CONTROL CODE- IHMPUSA/ AKG/ 3RD YEAR STUDENT HANDOUT from the standard. This method of pricing will assist measuring the performance of the kitchen accurately by means of the kitchen gross profit, as the typical excuse for a poor kitchen performance, a loss gross profit because of high prices for commodities is no.1. 6. Last In First Out (LIFO): This may be applied to items which have a fluctuating market price. This assumes that issues will be made with the normal rotation of stock, but priced out at the latest purchase price for the items. 7. First In First Out (FIFO): This may also apply to items which does not have a fluctuating price. This assumes that issues will be from the earliest purchases and priced accordingly.