STORING AND ISSUING

The main objectives of a food and beverage cellar are to maintain an adequate supply of food
and beverage for the immediate needs of the business with the minimum loss through spoilage,
pilfering etc.

Stores and cellars should be located near the receiving department and where necessary to goods
lifts so as to reduce pilferage. Store rooms and cellars should be large enough for checking
goods, unpacking and assembling of orders prior to collection or delivery and for storing
purposes.

The stores area should be:-

Constructed with materials which are easy to clean

Well lighted

Adequately ventilated if not refrigerated

Windows should be adequately barred

Refrigerators and cold rooms have strong locks.

Doors should be strong and fitted with heavy duty locks with a separate key system to general
master key for the establishment.

Only store room staff should be allowed into the stores and senior staffs e.g purchasing officer, food
and beverage manager, food and beverage controller etc.

Keys should be kept by head storekeeper or head cellar man only, with a duplicate set kept in
purchasing office.

STORES LAYOUT

The layout of the total storage area should be designed in relation to the type of establishment.

A general storage area should have mobile shelving racks to allow easy cleaning.

The layout should be in such a way that the walking distance by store men is minimised.

Space available should be well utilised and the following aspects should be taken into
consideration:-

Special facilities

Refrigeration of meat, dairy produce, and frozen foods

Special racks of wine bottles

Specially designed bins or containers for dry goods, fresh fruits and vegetables

Shelving of tinned goods

Drip trays for cooking oils

Bins are placed to provide enough room for passage of staff, materials, trolleys and equipments.

The room should be kept clean and tidy and there should be enough lights from the windows (natural
lights)

Use bins and racks for most items.

Heavy goods to be on the floor

Goods should be well stacked in rows of ten for easy counting

There should be free flow of materials after delivery and unpacking through the store after
requisition into the kitchen or bar e.g

Incoming materials

Unloading

Inspection

Bins stores

Kitchen

Restaurant

The stores department is responsible to receive the materials (food and beverages) and hold these
materials until they are required by user department.

The stock record provides the information regarding the receipts, issues and stock balances of
materials.

MAIN FEATURES OF EFFCETIVE AND GOOD STOREKEEPING

Immediate location of materials

Speedy receipt and issue of materials

Full identification of all materials at all times

Keeping correct and up to date records of receipts, issues and stock balances of materials.
Protection of materials against fire and theft

Protection of materials against deteriorations and pilferage

Economical use of storage space.

SANITATION, SAFETY AND STORES SECURITY

Hygiene and sanitation

Hygiene and sanitation in and around stores is of paramount importance

Stores should be kept neat and clean so as to prevent food been attacked by moulds and bacteria

Dry food stores should be fly-proofed and walls treated with suitable insecticides.

All stores should be guarded against rodents and pests, to safeguard both staff and customers against
infested and contaminated foods.

The following points must be kept in mind:-

Wash floors, walls and shelves once a week or fortnight and disinfection of spaces.

Inspect incoming food for signs of damage, spoilage or infestation before storing.

Arrange food systematically, so that old stocks are used first.

All opened packages should be put in covered air-tight containers before re-storing.

Foods of similar type should be stored together.

Staff should be given clean coats, and made to observe the rules of personal hygiene while handling
food items.

STORES SECURITY

Stores stocks items of daily use which are so vulnerable to pilferage and theft, therefore extremely
important to provide safety and security measures.

In addition, stores have a lot of money blocked in stocks, which makes security a vital aspect of store
management.

The safety hazards to which stores can be exposed are:-

Infestation or contamination of food held in storage.

Theft or pilferage

Fraud
Microbial spoilage due to improper temperatures and humidity controls especially in cold storage

Fire.

WAYS OF IMPROVING AND MAINTAINING SECURITY

Good should only be delivered at stated time when store staff are on duty and able to receive them.

Damage or opened package should be recorded on delivery notes before signing of receipts.

Delivered goods should be checked against both advice note and order

Have minimum inlets or outlets to the stores.

The storekeeper’s office must be positioned such that supervision is possible at all times and the
door is in full view during working hours.

At no time should the store be left unmanned

Valuable stock should be under lock and key and goods must not be left outside the store.

Faulty and missing items should be notified to the buyer or the supplier at once.

Only authorised person to be allowed in the store

Issue counters must close by roll-down shutters or half doors.

Proper store records should be kept and periodic physical stock taking should be organised

A guard on 24 hour duty is important

A well guarded exist inhibits pilferage is a personal checking system is established when staff go off
duty.

TYPES OF STORES

The organisation of stores varies in different establishments.

There are three main types of stores namely:-

Centralised stores

Decentralised stores

Imprest stores

CENTRALISED STORES
 In this type of store, materials are kept in one central warehouse and these are issued from one
central point.

Advantages

Smaller stocks are needed

Less staff required

Paper work is reduced

Control of stock level is easy and simple

Better security measures can be introduced

Less risk of duplication of items of stock

Disadvantages

Higher transportation cost and increased handling

Possibility of breakdown of transport vehicles

Inconvenience to personnel

Increased fire risk

Delays in supplying materials to branches and departments at distance places

DECENTRALISED STORES

This is type of store whereby materials are held and issued by sub stores in each department or
branch. The advantages and disadvantages are same as centralised.

IMPREST STORES

In this kind of store, the materials are received by central but some items of these materials are
issued to sub stores on the basis of imprest system. A specific quantity of each item of materials
is issued to the storekeepers of a specific department at the start of any period. At the end of this
period the storekeeper will inform about the number of items of any material used for
production. The specific number of item of the material will be replaced at the atart of next
period eg if consumption of material X is 2000 units per week then imprest of 2000 units is
organised. If at end of any specific week the storekeeper remains with 150 units then he will get
1850 more units of this material at the start of following week. In this case the imprest quantity
of 2000 units will be restored.

NOTE:- there are three types of stores in food and beverage operation as:-
 Perishable stores

Dry stores

Beverage stores

The three falls under the three types of stores mentioned above.

DUTIES OF STOREKEEPER

The storekeeper holds a very responsible position in any establishments. The extend of his
responsibility will depend with nature and size of the establishment.

The storekeeper is responsible for the following duties:-

To receive and store all materials until correctly required

To keep all materials in store in good condition

To issue materials against authorised requisition

To keep all unauthorised persons out of the store area.

To allow physical stock taking to take place when ordered y management.

To check bin cards or stock ledgers systematically to ensure that re-ordering takes place when
minimum stock levels are reached.

To prepare an issue analysis from the requisitions, this is then forwarded to the food and beverage
controller for statistical reports and analysis.

MATERIAL CODING

Code - a system of symbols designed to be applied to a classified set of items to give a brief
accurate reference facilitating entry, collation and analysis.

Materials are coded for immediate identification. If there are different sizes or models of any
materials then the code numbers are given to these different sizes or models will assist to identify
them. The codes numbers identify items of different or particular sizes.

PURPOSES OF CODING

To avoid ambiguity in description.

Ambiguity - The state of having more than one possible meaning.

To minimise length in description

 PRINCIPLES OF CODING

Exclusive

This means each item should have only one code and this code should not be used for any other
item.

Certainty

Code numbers used for different types of materials should be certain and there should

be no possibility of confusion.

Elasticity

The code number should be arranged in such a way that it must be possible to include new items if
need arises.

Brevity

Codes should be as brief as possible.

Memorisation

Codes should be easy and possible to remember and understand the code number.

Uniformity

Codes should be of equal length and of the same structure.

STORAGE CONDITIONS

There are basic conditions that should be followed to ensure that goods are stored properly.

These conditions are:-

The height of the store ceiling must be at least 3.5 to 4 metres.

Racks must be of stainless steel for fresh food items and non-porous metal like galvanised steel and
iron for dry items, to avoid them rusting and transferring the rust to the goods.
Racks must have legs and have a clearance of about 6’’ to 8’’ from the ground to protect the goods
from floor moisture and white ants.
The space between the shelves must vary from 50cm to 90 cm depending upon the size of packages
and jars. For smaller packs and bottles a space of 30cm to 40cm is adequate.
Racks must be placed at the centre of the store room preferably. If this is unavoidable a space of 8cm
must be kept away from walls.
The height of the racks must be about 2.3 metres beyond which it will be difficult to reach.
Floor must be of concrete or heavy tiles.
The store must be free from insects and vermin.
All vegetables and fruits must be thoroughly washed and placed in storage bins or aluminium trays,
which must be sealed with cellophane paper.
The following packing norms in storage must be followed:-
Meat carcasses must be wrapped in cloth before placing them in deep freezers.
Jute sacks or polythene jars are used for cereals, cereal products, pulses and their products, nuts
and roasted products.
Cardboard trays or cartons for eggs
Cans and jars for p[reserved food
Spices and condiments should be in their packs or polythene jars.
Food colouring and essences stored in their bottles or tins.

There must be adequate space between racks for loading and unloading racks and cleaning and pest
control schedules.
Heavier packages must be kept on lower shelves and lighter ones on higher shelves. Never keep items
on the floor.
Store must have temperature gauges to monitor the temperatures of items.
Stores must be away from steam and hot water pipes.
There must only be one entrance and exit.
Fluorescent lights in troughs must be placed in ceilings at angles to the racks to get the best lighting.
Ensure that the ceiling lights are not too close to the top most shelf because heat from the lights can
ruin the quality of food stored there.
Ventilators and exhaust fans provide air-circulation to the store; however, they must be high enough to
be closer to the ceiling.
STORAGE OF MATERIALS
Different types of commodities require separate storage conditions in order to maintain or
improve their conditions and quality.
These commodities are grouped into categories as follows:-
Meats and poultry
Fish and shell fish
Fruits and vegetables
Dairy products
Frozen foods
Tinned foods
Dry foods
MEAT AND POULTRY
All sides, quarters or whole carcasses should be hung in a cold room at a temperature of 0-
1°c with a space between them to allow free circulation of air with drip trays underneath in order
to collect any blood. This period varies between 2-10 days according to the type of meat,
permitting a chemical change to take place to produce more tender meat.
Poultry and game if undrawn should be hung at temperature of 0-1°c with exception of venison,
hare and rabbit should be hung 3-4°c. drawn or eviscerated poultry should be stored on slatted
shelves at 0-1°c and game placed on metallic trays at the same temperatures.
FISH AND SHELL FISH
Wet fish should be stored in a separate, special type of refrigerator with perforated non-rust trays
allowing the fish to drain and permitting easy cleaning of the refrigerator. The fish should be
placed on crushed ice on a wet cloth, covered with another wet cloth and crushed ice being
stored at a temperature of 1°c.
Shell fish should be placed in boxes covered with wet sack and crushed ices, at a temperature not
lower than 3°c.
NOTE:- both wet fish and shell fish should be stored for the minimum period of time possible.
FRUITS AND VEGETABLES
All types of fruits and vegetables needs careful storage, room where there is no sunlight. The
room should be dry, cool and well ventilated with bins for root vegetables and racks for others.
Fruit and vegetables deteriorate quickly and space should therefore be available to enable easy
stock rotation and to identify ant rotten items for their quick removal as they will affect others.
Bananas and pineapples should be stored in a cool room.
Soft fruits and melons should be refrigerated at 1-2°c.

DAIRY PRODUCTS
Most dairy products with the exception of cheese should be stored in a refrigerator or cold room
at a temperature of 0-4°c.
Milk should be stored in the container in which it is delivered and kept covered because it wil
absorb strong smells.
Cheese should be stored in a cool place which is dry and well ventilated because of its strong
smell, should be kept away from other items and if to be stored for a period of time they should
be rotated occassionary.
Butter and eggs also absorbs strong smells especially those of fish and onions and cheese.

FROZEN FOODS
There is variety of frozen foods either cooked or uncooked and they should be stored at a
temperature of at least -10°c. The lower the temperature of the freezer means food can be kept
for a longer time i.e -17°c for 1 year and -27°c for 2 years.
All foods should be kept frozen until needed but time must be allowed for defrosting before
issuing.
Food should be kept on plastic coated trays in upright deep freezers and in plastic basket in the
chest type of deep freezer.

TINNED FOODS
Tinned foods should be stored in a dry, well ventilated store to prevent them from rusting. They
should be unpacked from their cases and inspected for bulges (i.e blow tins) caused by gases
from either bacteria or the tin plating being attacked by the food and if this happens should be
thrown away.

DRY GOODS
They include:- sugar, flour, pulses, cereals, preserves foods such as jam, pickles, canned and
bottled foods, cakes, dried fruits, tea, coffee, bread etc.
The stores should be cool, dry and well ventilated with all commodities being kept in bins with
lids.
Some dry goods require air-tight lids e.g tea, coffees, rice and nuts without shells.
Other items like bread, flour or sugar should have loose fitting lid. Goods with strong aromas
should be stored away from other items that are likely to absorb their flavours.
 CLEANING MATERIALS
They are stored in a separate store because of their strong smells and possibility of confusion or
mistakes accidentally being made in their use. The stores should be dry, well ventilated with
slatted (racks for hanging materials) racks used for storage purposes.

LIQUOR STORES AND WINE OR BEER CELLAR

All drinks should be stored in a room which has constant temperatures which is maintained by
automatically controlled air-conditioning systems.
Wines should be racked in order to preserve their quality and to facilitate easy stock taking.
Spirits and liqueurs should be stored upright in deep shelves.
Bottled beers are stored in their crates in separate store.
Extra space for storage of empty bottles and crates because of their value.
Draught and keg beer should be stored in separate area of their liquor store which is accessible from
dispensing areas because of the need to change barrels of keg during service and is usually
separate from other liquor store.

FOOD QUALITY IN STORAGE

Where large quantities of food materials are stored, it is imperative that steps be taken to ensure
that the quality of foods does not deteriorate on storagr i.e respective stores.
FACTORS THAT AFFECT FOOD QUALITY IN STORES.
These are:-
Excessive handling
Fluctuating temperatures and humidity
Sunlight
Infestation
Careless staff

Excessive handling
 This can damage packages, making it possible for foods like biscuits, noodles or other cereal
products to become soggy or mouldy or broken making them unfit for use.
Damage to foods like fruits and vegetables can cause enzymatic and oxidative discolouration
affecting their quality.
Temperature and humidity
Uncontrolled temperatures and humidity can lead to evaporation or absorption of moisture,
leading to drying or sogginess the latter providing suitable conditions for microbial growth.
Sunlight
In stores at certain time of the day, sunlight falling either upon milk and milk products or upon
other food containing vitamin B2, can affect their contents. Light and heat can also affect the
quality of stored oils and fats and foods containing them.
Infestation
Attack of cereals and pulses by weevils, presence of white ants in the store, or rodents and other
pests can damage the flavour, and quality of foods, making them unfit for consumption.
Careless staff
Careless handling of food items by staff can lead to contamination of poorly stored foods.
With all these factors in mind, efforts should be aimed at increasing shelf life of food items
through care in receiving and storage, while at the same time maintaining quality.

STOCK-TAKING
Definition - this is physically checking and making a list of all items in the store.
- means to check physically the stock items in order to ensure that quantities
shown on stock records and actual quantities are the same.
OBJECTIVES OF STOCK-TAKING
To determine the value of goods held in stock
To compare the value of goods held in store at a particular time with the book value of stock
To identify or list slow moving items or products or goods
To compare the usage of foods with the food sales so as to calculate the food cost % and gross profit,
To determine the rate of stock turnover for different groups of foods.
To deter pilferage and check security and control system.
Stock taking is done every trading period by staff not directly not concerned by store keeping
together with storekeeper or cellar man under the supervision of member of food and beverage
management or control staff.
Stock taking lists are printed in a standard format related to layout of the room.
After completing, all discrepancies are investigated and stock records adjusted to show the actual
quantities of each item at hand.
A summary report is then made to the management and action taken where necessary.
Details in stock taking list:-
Bin number
Items
Unit in which stocked (eg. Kgs, tins, litres) especially purchasing unit
Quantity (i.e number of units in stock)
Unit price
Total value (i.e value of stocked units)
Last checking ( i.e value of stock when lastly checked)
Discrepancies
Remarks concerning the flow of items.
Professional stock takers can be used at the end of the year for stock taking.
All records are removed from the store so that work is done efficiently.
The yearly stock take will provide information to accountants for the preparation of the final
accounts.
METHODS OF STOCK-TAKING
They are also known as systems of stock taking. There are three methods namely:-
Perpetual inventory
Periodic stock taking
Continuous stock taking
PERPETUAL INVENTORY
This means the use of a record card for each item of stocks that shows the balance in hand after each
transaction.
This involves recording all receipts, issues and running balances on each card.
This method is mostly used together with continuous stock taking system where by the recorded
balances are compared with physical balances.
This method ensures a continual, detailed and reliable check of the stock items. It helps to
investigate the discrepancies in time and take appropriate measures against corrupt and careless
staff.
PERIODICAL STOCK-TAKING
Under this method, all stocks are counted at one time at regular intervals such as six months or one
year.
In annual stock-taking, the physical quantities of stocks on hand are ascertained at the end of each
year.
Stock-taking may take a few hours or several days.
This method avoids the continuous stock-taking but makes it more difficult to investigate
discrepancies.

CONTINOUS STOCK-TAKING
This method is almost similar to perpetual inventory system.
Under this method, recorded balances are compared with physical balances.
It means quantities are continuously checked against the appropriate perpetual inventories balances
figures.
Principles of continuous stock-taking
A few items should be checked.
Checking should be made by staff unconcerned with keeping of stores.
There should be an element of surprise.
All discrepancies should be investigated immediately`.
Advantages of continuous stocktaking
Stock takers are able to work round the production process, thereby avoiding shutdowns and
consequent losses in production and profits;
Discrepancies are quickly discovered and investigated;
Financial losses resulting from obsolescence and stock deterioration are reduced;
Regular monitoring of stocks improves the quality of control and limits losses resulting from
misappropriation;
Stock information produced for management purposes commands a higher level of confidence by
reason of regular verification
The competence of personnel employed in the stores and the stock recording process is evaluated on
an ongoing basis.
N/B: to avoid collusion between stores management personnel, independent auditors should
be involved in the physical verification of stocks.
Stock reconciliation
The object of the stock-take is to see if the stock records represent accurately the level of stock held.
The comparison between the stock-take and the stock record is known as stock reconciliation. This is
an important process because:-
an accurate stock figure can then be used to value the stock
it will highlight any discrepancies which can then be investigated
Discrepancies and queries in stock reconciliation need to be referred to the company’s managers and
any other people who may need to know, eg the firm's auditors who are organising the stock-
take. If the discrepancy is a small shortfall in the physical stock compared with the stock record,
it will be authorised for write-off. Larger discrepancies will need to be investigated, as they
could have been
caused by:-
an error on the stock record, such as
a failure to record a receipt or an issue of goods
an administrative error, eg 100 items received recorded as 10 items
different items issued to those recorded, eg a size 8 issued instead of a size 10
an error in calculating the balance of stock
theft of stock
damaged stock being disposed of without any record having been made
Once an accurate figure for closing stock has been agreed it can then be used in the financial
statements – to calculate profit, and for the balance sheet.

STOCK TURNOVER
This means the number of times the average stock is used (i.e the rate of use of an item).
This may be expressed as the number of times each year, or the number of day it takes.
The rate of stock turnover is calculated by the formula:-
RST = Cost of food consumed÷Average stock or Annual cost of
sale÷Average cost of stock
Where RST= rate of stock turnover
Cost of food consumed = O.S + P - CS or can be given directly
Average stock = 1/2( O.S + C.S)
Example 1.
£2900 of food purchases were consumed in a 28-day trading period. The opening stock on day 1
was valued at £750. The closing stock on day 28 was valued at £650. Calculate the rate of stock
turnover.
Solution
RST = Cost of food consumedAverage stock
RST = £2900÷(750+650) ÷2
= £2900÷700
= 4.14 times
This means that the total value of the stock turned over 4.14 times in the 28-day trading period
and that just less than one week’s stock was held on average at one time.
Example 2.
In a 28-day trading period the total cost of food consumed was £3000. The opening stock in day
1 was £800 and the closing stock was £700. Calculate the rate of stock turnover.

Solution
RST = Cost of food consumed÷Average stock
RST = £3000÷ (800+700) ÷2
= £3000÷750
= 4.0 times
This means in a 28 day trading period, the total value of stock turned over 4 times and that an
average of 1 week stock was held during the period.
 Example 3.
A restaurant consumed £38,000 worth of stock during a year to achieve it sales. The restaurant
held an average stock of £1000 throughout the year. Calculate the rate of stock turnover.
Solution
RST = Cost of food consumed÷Average stock
RST = £38,000÷1000
= 38 times per annum.
NOTE:- this may be expressed in days by dividing the number of times per annum into the
number of days open during the year
i.e ?〰umber of daysRate of stock turnover

For the above calculate the stock turnover in days if the establishment was open for 360 days
and 200 days in a year.
Solution
a) Number of daysRate of stock turnover
= 360÷38 = 9.4 days
b) Number of days÷Rate of stock turnover
= 200÷38 = 5.2 days
Example 4.
Calculate the stock turnover in times per annum and in days for the following establishment:-
A seasonal Hotel open 190 days a year
Cost of sales £76,540
Average stock held £3,220
Solution
RST = Cost of food consumed÷Average stock
RST = £76,5403,220 = 23.77 times per year
In days Number of days÷Rate of stock turnover
= 190÷23.77 = 7.9 days
An industrial canteen open 300 days a year
 Cost of sales £106,200
Average stock held £1,610
Solution
RST = Cost of food consumed÷Average stock

RST = £106,200÷1,610 = 65.96 times per year

In days Number of days÷Rate of stock turnover

= 300÷65.96 = 4.55 days

A school meals canteen open 200 days a year.
Cost of sales £30,000
Average stock held £4,950
Solution
RST = Cost of food consumed÷Average stock

RST = 30,000÷4,950 = 6.06 times per year

In days Number of days÷Rate of stock turnover

= 200÷6.06 = 33 days
When deciding the stock turnover necessary for an establishment to operate efficiency, the
caterer must consider the following factors:-

Location and frequency of deliveries

Range of products necessary i.e menu and liquor sold

Deterioration of materials to be used.

Storage facilities available.

Cost restrictions of stock and capital available

NOTE:- Typical stock turnover figures for a month are at least 20 times for perishable
items and 4 times for non perishable (ie deliveries once a week)

PROBLEMS OF A LOW STOCK TURNOVER

Capital is tied up and cannot be used elsewhere in establishment

There is an increased risk of spoilage

With an unnecessary high stock levels, the payroll may be greater than is really necessary

The insurance on the stock is higher than necessary

STOCK CONTROL

Stock control means making sure that the business has the right quantity of goods, in the right
place and at the right time. Stock control is of great importance in any organisation. Stock
includes goods of various kinds eg. Raw materials, stationery etc. Stock of goods represents
money and it must be controlled effectively.

OBJECTIVES OF STOCK CONTROL

To ensure the availability of goods when required.

To account for the goods which have been purchased.

To reduce storage cost as much as possible.

To minimise the risks of deterioration, wastage and theft.

To maintain accurate records (up to date).

To avoid over-stocking and under-stocking.

STOCK LEVELS

The level at which item of stock is held is difficult to determine with two dangers:-

Either running out of stock

Overstocking of the item (tying up necessary capital)

 That is, if stock levels is too low then this stock level cannot meet the production demand. The
decrease in production results in loss of customers and profit also reduces while on the other
hand when stock levels are too high, storage cost increases and there is greater risk of

deterioration of these stocks hence reduce profits of the establishment.

DETERMINANTS OF STOCK LEVELS (factors that determine stock level)

The maximum and minimum forecast usage figures for trading period

The re-ordering time for the item

The economic ordering quantity

The market trends (changes in delivery, prices, availability)

The storage space available

The budget available for purchasing

The shelf life of the item.

FACTORS WHICH AFFECT THE STOCK LEVELS

Availability

If a particular item of materials is easily available throughout the year, the stock level should be low
and vice versa.

Lead time

This is the period between the date of order and date of delivery. If lead time is more then the stock
must be maintained at high levels and vice versa.

Stock holding cost

This is the cost of keeping materials in store. If stockholding cost is high then stock levels must be low
and vice versa.

Consumption

If any material is consumed in greater quantity then it must be maintained at high levels and vice
versa.

Durability
The stock level of durable goods can be maintained at higher levels but in case of perishable goods like
fish and fruits, it should be kept at low levels.

Trade discount

Sometimes, the suppliers offer higher discounts for large quantities. If the benefit of trade discount is
greater than stock holding cost then stock levels must be maintained at higher levels.

SETTING STOCK LEVELS

Stock levels are set up by an establishment as a policy matter. For effective operation in the
establishment their stock levels has to be adhered to. These are as under:-

Minimum stock level

This is the level below which stock should not be allowed to fall. If stock falls below this level then
there is possibility of production stoppage due to lack of materials. This level is also called
buffer or safety stock.

Buffer or safety stock - is the minimum level of stock item which must be held to prevent
establishment running out of supplies of that specific item.

Maximum stock levels

This is the level beyond which stocks should not be allowed to rise. It is desirable that the level should
be as low as possible but it must be adequate according to the requirements of the establishment.

Factors that are taken into account in determining the maximum stock level are:-

Usage rate;

Risk of deterioration and obsolescence;

Market supply factors;

Storage space available;

Cost of financing stockholding.

Re-order level

This is the point at which purchase order must be sent to the supplier for the supply of more materials.
This level is higher than minimum stock level but lower than the maximum stock levels.

Re-order quantity
This is the quantity for which purchase order is placed. This quantity depends upon the above factors.

Average stock level

This is the average of maximum and minimum stock levels

AVERAGE STOCK LEVEL =(Maximum stock levels+Minimum stock level)÷2

FORMULAE OF STOCK LEVELS

Mathematical formulae have been developed to establish stock levels. These are:-

Re-order level = Max: C x Max: RP

Minimum stock level = RL - ( NC x NRP)

Maximum stock level = Min: SL + RQ + ( Min: C x Min: RP)

Re-order quantity = Max: SL - Min: SL - (Min: C x Min: RP)

Where:-

Max: C = Maximum consumption

Min: C = Minimum consumption
NC = Normal consumption
Max: RP = Maximum re-order period
Min: RP = Minimum re-order period
NRP = Normal re-order period
RQ = Re-order quantity
Min: SL = Minimum stock level
Max: SL = Maximum stock level
EXAMPLE 1.
The following information is provided for material PQ 251.
Maximum consumption = 6,000 units per week
Minimum consumption = 4,000 units per week
Re-order period or lead time = 4 - 6 weeks
Re-order quantity = 30,000 units
 Required to calculate:-
Re-order level
Minimum stock level
Maximum stock level
Average stock level

Answer
Re-order level = Max: C x Max: RP

= 6,000 x 6
= 36,000 units

Minimum stock level = RL - ( NC x NRP)

= 36,000 - ( 5000 x 5)
= 36,000 - 25,000
= 11,000 units

Maximum stock level = Min: SL + RQ + ( Min: C x Min: RP)

= 11,000 + 30,000 + ( 4,000 x 4)

= 11,000 + 30,000 + 16,000
= 57,000 units

Average stock level = Maximum stock levels+Minimum stock level2

= 57,000 + 11,0002

= 34,000 units
Workings
 NC = 6,000 + 4,0002
= 5,000 units

NRP = 4 + 62
= 5 weeks
EXAMPLE 2.

From the following information, find out the re-order quantity:-

Minimum consumption = 2,000 units per week

Minimum re-order period = 4 weeks
Minimum stock level = 3,000 units
Maximum stock level = 12,000 units
Answer

Re-order quantity = Max: SL - Min: SL - (Min: C x Min: RP)

= 12,000 - 3,000 - (2,000 x 4)

= 12,000 - 3,000 - 8,000

= 1,000 units

EXAMPLE 3.

Determine maximum and ordering level of detergent A from the following information.
(maximum stock level & re-order level)

Average daily requirements (NC) = 600 litres

Daily weekly requirement (Max) (Max: C) = 800 litres
Daily weekly requirement (Min) (Min: C) = 400 litres
Time to get fresh supplies (Lead time) = 2 - 6 days
Ordering quantity = 1,000 litres
(7 marks)
Answer
Re-order level = Max: C x Max: RP
 = 800 x 6
= 4,800 litres

Minimum stock level = RL - ( NC x NRP)

= 4,800 - ( 600 x 4)
= 4,800 - 2,400
= 2,400 litres

Maximum stock level = Min: SL + RQ + ( Min: C x Min: RP)

= 2,400 + 1,000 + ( 400 x 2)

= 2,400 + 1,000 + 800
= 4,200 litres

EXAMPLE 4.

The following information was obtained from the books of kamau’s food court:-

Consumption per week: Minimum = 600 units

Normal = 800 units
Maximum = 1,200 units
Re-order period: Minimum = 2 weeks
Normal = 3 weeks
Maximum = 5 weeks
Re-order quantity: = 5,000 units
Required to calculate:-
Re-order level
Minimum stock level
Maximum stock level
Answer

Re-order level = Max: C x Max: RP

= 1,200 x 5
= 6,000 units

Minimum stock level = RL - ( NC x NRP)

= 6,000 - ( 800 x 3)
= 6,000 - 2,400
= 3,600 units

Maximum stock level = Min: SL + RQ + ( Min: C x Min:RP)

= 3,600 + 5,000 + ( 600 x 2)

= 3,600 + 5,000 + 1,200
= 9,800 units

ECONOMIC ORDER QUANTITY

This is the quantity at which the cost of having stocks is minimum. The cost of having stock is
broken down into:-

Holding costs which comprises:-

Cost of capital tied up

Ware housing

Deterioration

Obsolescence

insurance

Ordering costs which comprises:-

 Clerical costs

Telephone charges

Assumptions of economic order quantity

The ordering cost is constant.

The rate of demand is known, and spread evenly throughout the year.
The lead time is fixed.
The purchase price of the item is constant i.e. no discount is available
The replenishment is made instantaneously, the whole batch is delivered at once.
Only one product is involved.

The E.O.Q calculation is a useful starting point in establishing an appropriate re-order quantity.

The E.O.Q formula is given as:-

Economic Order Quantity (E.O.Q) = 2 cdip

Where:-

c - Delivery cost per batch / ordering cost per order / cost of placing

and receiving an order

d - Annual demand for product / Demand per annum

p - Cost price per item / unit cost

i - Stock holding cost per annum / carrying cost per annum.(expressed

as a fraction of stock value)

EXAMPLE 1.

A company has an annual demand for material ‘P’ of 25,000 tons per annum. The cost price per
ton is Sh. 2,000 and stock holding cost is 25% per annum of the stock value. Delivery cost per
batch is Sh. 400.

Calculate the economic order quantity.

Solution

Economic Order Quantity (E.O.Q) = 2 cdip

 = 2 400(2500)25% of 2000

= 2 400(2500)500

= 4,000

= 200 units

EXAMPLE 2.

Find the E.O.Q where the forecasted demand is 1000 units per month, the ordering cost is Sh.
350 per order, the unit cost Sh. 8 each and it is estimated that carrying cost are 15% per annum.

Solution

Here c - sh. 350

d - sh. 1000 x 12 = 12,000 units per annum
i - 15%
p - sh. 8
thus;-

E.O.Q = 2 cdip

= 2 x 350 x 1200015% of 8

= 2 x 350 x 120001.2

= 2645.75 units

= 2646 units

EXAMPLE 3.

Hotel global purchase garbage bags at Ksh.15.00 per dozen. The annual usage is 800 dozens.
The cost of placing an order is Ksh. 100.00. The cost of carrying one dozen for one year is Ksh.
4.00. Calculate the E.O.Q.

Solution

Here c - sh. 100

d - 800
i - sh. 4
 p - sh. 15
thus;- E.O.Q = 2 cdip

= 2 x 100 x 800×4 x 15

= 160,00060

= 52 units

EXAMPLE 4.

The rate of use of flour from stores is 20 bags per year. The cost of placing and receiving an
order is Ksh 40. The cost of each bag is Ksh. 100. The cost of carrying an inventory per year is
0.16 and it will depend on the stock.

Solution

Here c - sh. 40
d - 20 bags
i - 0.16
p - sh. 100
thus;- E.O.Q = √cdip

= 2 x 40 x 0.16 x 100

= 1,60016

= 10 units

NOTE:- from above information we can still find economic order quantity by use of
tabular or diagram or graph methods.

For this purpose, we have to calculate:-

Number of deliveries

Stock holding cost

Total cost

Number of deliveries
This means how many times, stocks are purchased during the whole year. This is give by the
formula:-

Number of deliveries = Total annual demand÷Batch size i.e E.O.Q by formula

Example:- annual demand 25000 tons

Batch size 200 units

Therefore, Number of deliveries = Total annual demand÷Batch size i.e E.O.Q by

formula

= 25,000 tons÷200 = 125 deliveries

NOTE:- number of deliveries is taken as a whole number. Therefore any number of

delivery is in point form is rounded to next whole number.

Number of deliveries can be used to calculate the delivery cost.

That is, Delivery cost = Number of deliveries x Delivery cost per batch

Stock holding cost

It is taken as a specific percentage of the value of average stock where;-

Value of average stock = average stock x cost price per unit (p) and

Average stock = Batch size (q)2

Example:-If 200 units are purchased at one time, on average 100 units ( i.e average stock =
Batch size (q)2 = 2002 = 100 ) will remain in stock and value of stock will be 20,000

(i.e Value of average stock = Average stock x cost price per unit (p)

= 100 x 2000

= 200,000/=

The stock holding cost will be 25 % of value of average stock

e.g 25100 x 200,000 = 50,000/=

Total cost

This is the sum of stock holding cost and ordering cost.

 Tabulation method

We require:-

Annual demand / usage (d)

Delivery cost per batch / ordering cost per order (c)

Cost price per item (p)

Stock holding cost (carrying cost)

Example.

A company has an annual demand for material ‘P’ of 25,000 tons per annum. The cost price per
ton is Sh. 2,000 and stock holding cost is 25% per annum of the stock value. Delivery cost per
batch is Sh. 400.

Calculate the economic order quantity of material ‘p’ purchased using tabular method..

Solution E.O.Q ( Batch size) = √cdip

= √400(2500)25% of 2000

= √ 400(2500)500

= √4,000

= 200 units

Batch No. Of Average Value of Stock delivery total

size Stock Average holding

(Q) Deliveries Q/2 stock cost Cost cost

SH. SH. SH. SH.

100 250 50 100,000 25,000 100,000 125,000

150 167 75 150,000 37,500 66,800 104,300

200 125 100 200,000 50,000 50,000 100,000

250 100 125 250,000 62,500 40,000 102,500

300 84 150 300,000 75,000 33,600 108,600

Workings.
 Number of deliveries = Total annual demand÷Batch size i.e E.O.Q by formula =
25,000 tons÷200 = 125 deliveries

Average stock = Batch size (q)2 = 2002 = 100 units

Value of average stock = Average stock x cost price per unit (p) = 100 x 2000

= 200,000/=

Stock holding cost = 25% of value of average stock = 25% of 200,000

= 50,000/=

Delivery cost = Number of deliveries x Delivery cost per batch

= 125 x 400 = 50,000/=

Total cost = Stock holding cost + Delivery cost

Total cost of 200 units batch size is Sh. 100,000 which is minimum.

GRAPHIC METHOD

Using the same example as in tabular method plot cost against units

To draw up this we require the following curves:-

Total cost

Delivery cost

Stock holding costs

In the graph below we can see, total cost is lowest against 200 units batch size so this quantity is
the economic quantity.

Example

Hotel Global purchase garbage bags at Ksh 15.00 per dozen. The annual usage is 800 dozens.
The cost of placing an order is Ksh 100.00. The cost of carrying one dozen for one year is
Ksh.4.00

c = 100/=
 p = 15/=

d = 800

i = 4/=

Batch No. Of Average Value of Stock delivery total

Average holding
size (Q) Deliveries Stock Q/2 stock cost cost cost

SH. SH. SH. SH.

13 62 6.5 98 390 6,200 6,590

26 31 13 195 780 3,100 3,880

39 21 19.5 293 1,170 2,100 3,270

52 16 26 390 1,560 1,600 3,160

65 13 32.5 488 1,950 1,300 3,250

78 11 39 585 2,340 1,100 3,440

91 9 45.5 683 2,730 900 3,630

Number of deliveries = Total annual demand÷Batch size i.e E.O.Q by formula =

800÷52 = 15 deliveries

Value of average stock = Average stock x cost price per unit (p) 15

Stock holding cost = carrying cost (4) x value of average stock

Delivery cost = Number of deliveries x Delivery cost per batch

ISSUING

The process of issuing is a critical control point.

The issue must be done accurately as it represents the future food costs.

Before an issue is made there are some procedures and practices that the storekeeper must follow:-
Each time in the store must have a bin card mentioning arrivals, issues and balance stock.

Each item must have par stocks to ensure proper supply to the operation

Par stock - are the minimum quantity in stock before re-ordering takes place.

Storekeeper must know the lead time for the supply of each item.

Lead time - time taken by supplier to supply products from the time they are ordered

The storekeeper is responsible for the inventory costs and must ensure to keep the optimum required
for operations and not over-stock item.

The storekeeper must refuse early deliveries from suppliers to avoid gluts of his store with excess
inventory.

Must keep a minimum range of items.

Have separate store for beverages

Beverage storekeeper must be qualified i.e thorough knowledge of all beverages.

Items are issued to department at set times in the day against a requisition signed by an authorised
person e.g head bar man, head chef, restaurant manager etc.

Large requisitions are handed in the day before to allow the storekeeper time to collect them
together.

Supplementary issues can be obtained during normal hours but should be discouraged as they
prevent store man or cellar man from doing work officially.

Beverages are issued same way as food items with following modifications:-

Maintain bar par stock

Issue bottles strictly against consumption which means that the beverage storekeeper has to account
for empty bottles against which he issues filled ones.

Beverage issues are made once a day

All bottles are stamped to identify them as belonging to the property.

Keys of the beverage store after hours are kept with the front-office cashier and accessed only by the
duty manager.
 METHODS OF VALUING MATERIAL ISSUE (pricing of store issues)

The difficulty in stock valuation is in finding out the cost price of stock – this is not easy when
quantities of a particular stock item are continually being bought in – often at different prices –
and then sold. Some companies have stock in a number of different forms, eg a manufacturer
may well have stocks of raw materials, work-in-progress and finished goods.
When materials are issued by the storekeeper, they are valued in order to determine the material cost
of different products.

Pricing of all stores issues is one of the most important aspects involved in pricing of dishes or fixing
liquor selling. The prices of issues will depend on the type of foods. Perishable foods are
transferred directly to the kitchen will be priced at the cost price.

Non-perishable may have been held in the stores for sometime during which the

prices has changed or their may be stock held in same bin at two or more different
purchase prices.

There are several methods of valuing material issues namely:-

First in, first out (FIFO)

Last in, first out (LIFO)

Simple average

Weighted average

Standard price

The following transactions are recorded in the stores ledger cards under each method:-

EXAMPLE

May 2, Received 500 units at Sh. 20 each

May 8, Received 300 units at Sh. 22 each
May 10, Issued 400 units
May 15, Issued 200 units
May 20, Received 600 units at Sh. 25 each
May 25, Issued 300 units
May 27, Received 200 units at Sh. 26 each
 May 30, Issued 100 units

Standard price for each unit for the month is Sh. 24

First in, First out (FIFO)

In this method, the first (oldest) stocks acquired are assumed to be used first. This means that the
stock on hand at any time is assumed to consist of the most recently acquired items.
This method is used for items of stock which are subject to price fluctuation.

Issues are made from items which came into the stores first and priced at their value when received
i.e materials are issued at the cost price of that consignment which was received first.

When this consignment is finished then cost price of next consignment is charged to value the
materials issues.

Advantages
It is realistic, ie it assumes that goods are issued in order of receipt
It is easy to calculate
Stock valuation comprises the actual costs at which items have been bought
The closing stock valuation is close to the most recent costs
Acceptable for tax purposes

Disadvantages
Costs at which goods are issued are not necessarily the latest prices, so cost of sales may not
represent current prices
In times of rising prices, profits are higher than with other methods (resulting in more tax to pay)
The method is cumbersome as the list of different costs must be maintained

The transactions given in example 1 are recorded under FIFO method in a stores ledger card

Date Receipt Issues Balances

QTY Price Value QTY Price Value QTY Value

SH. SH. SH. SH. SH.

May 2. 500 20 10,000 500 10,000

May 8. 300 22 6,600 800 16,600

May
10. 400 20 8,000 400 8,600

May 100 x
15. 200 20 2,000 300 6,600

100 x
22 2,200 200 4,400

May
20. 600 25 15,000 800 19,400

May 200 x
25. 300 22 4,400 600 15,000

100 x
25 2,500 500 12,500

May
27. 200 26 5,200 700 17,700

May
30. 100 25 2,500 600 15,200

Last in, First out (LIFO)

This method is again used for stocks which are subject to price fluctuation. Although item are
issued in a normal stock rotation system. (i.e the stock which has been in the store longest will be
issued first and the pricing of the issue will always be at the current market price)

Date Receipt Issues Balances

QTY Price Value QTY Price Value QTY Value

SH. SH. SH. SH. SH.

May 2. 500 20 10,000 500 10,000

May 8. 300 22 6,600 800 16,600

May 300 x
10. 400 22 6,600 500 10,000

100 x
20 2,000 400 8,000

May
15. 200 20 4,000 200 4,000

May
20. 600 25 15,000 800 19,000

May
25. 300 25 7,500 500 11,500

May
27. 200 26 5,200 700 16,700

May
30. 100 26 2,600 600 14,100

Simple average

The average price is calculated for the stock after each purchase, if the price has changed (i.e
when the first consignment is exhausted then the price of that consignment is eliminated and
simple average of reaming prices is calculated and so on)

The simple average at may 10 and 15 = (20 + 22)÷2 = 21

May 25 = (25 + 25)÷2 = 23.50

May 30 = (25 + 26)÷2 = 25.50

Date Receipt Issues Balances

QTY Price Value QTY Price Value QTY Value

SH. SH. SH. SH. SH.

May 2. 500 20 10,000 500 10,000

 May 8. 300 22 6,600 800 16,600

May
10. 400 21 8,400 400 8,200

May
15. 200 21 4,200 200 4,000

May
20. 600 25 15,000 800 19,000

May
25. 300 23.5 7,050 500 11,950

May
27. 200 26 5,200 700 17,150

May
30. 100 25.5 2,550 600 14,600

Weighted average

Weighted average means weighted average price

The total value of goods in stock is divided by the number of units of stock. This results to the
weighted average price.

This method is simple and logical but it is not close to current value of goods.

Under this method also profits or loss may arise on the materials issued.

Advantages
over a number of accounting periods reported profits are smoothed, ie both high and low profits are
avoided
fluctuations in purchase costs are evened out so that issues per unit do not vary greatly
logical, ie it assumes that identical units, when purchased at different times, have the same value
closing stock valuation is close to current market values (in times of rising prices, it will be below
current market values)
the calculations can be computerised more easily than the other methods
acceptable for tax purposes

Disadvantages
a new weighted average has to be calculated after each receipt, and calculations may be to several
decimal places
because they are averaged, issues and stock valuation are usually at costs which never existed
issues may not be at current costs and, in times of rising prices, will be below current costs

The formula for weighted average price is:

Weighted average = Total value of goods in stock÷Number of units

(QTY)

May 10 = Sh.16,600÷800 = 20.75/=

May 15 = Sh.8,300÷400 = 20.75/=

May 25 = Sh.19,150÷800 = 23.94/=

May 30 = Sh.17,169÷700 = 24.53/=

The transaction is recorded as follows:-

Date Receipt Issues Balances

QTY Price Value QTY Price Value QTY Value

SH. SH. SH. SH. SH.

May 2. 500 20 10,000 500 10,000

May 8. 300 22 6,600 800 16,600

May
10. 400 20.75 8,300 400 8,300

May
15. 200 20.75 4,150 200 4,150

May 600 25 15,000 800 19,150

 20.

May
25. 300 23.94 7,181 500 11,969

May
27. 200 26 5,200 700 17,169

May
30. 100 24.53 2,453 600 14,716

Standard price

This means pre-determined price.

This price is ascertained taking into consideration on number of factors:-

Materials consumption i.e the rate

Expected changes in the price of materials

All materials issues are valued at a standard price

This method is simple, stable and provides a check on the efficiency of the establishment

The standard price for the above example is valued at 24/=

Date Receipt Issues Balances

QTY Price Value QTY Price Value QTY Value

SH. SH. SH. SH. SH.

May 2. 500 20 10,000 500 10,000

May 8. 300 22 6,600 800 16,600

May
10. 400 24 9,600 400 7,000

May
15. 200 24 4,800 200 2,200

May
20. 600 25 15,000 800 17,200
 May
25. 300 24 7,200 500 10,000

May
27. 200 26 5,200 700 15,200

May
30. 100 24 2,400 600 12,800

All the materials issued have been valued at SH. 24 per unit which is the standard price.

STORES RECORD

This refers to documents which give information regarding the movement of stock.

They are also known as stock records

Records differ with size of establishment i.e large and small establishments.

The documents includes:-

STORES LEDGER

It is similar to financial ledger.

It shows the quantities and monetary values of the stock items.

Has three main columns namely:-

Receipt column (goods received i.e quantity, price and value)

Issues column ( goods issued by storekeeper i.e quantity, price and value)

Stock balance in hand (stock remaining in stores i.e quantity and values of goods)

BIN CARDS

These are cards prepare for each commodity showing the description of each item, date, quantity of
goods received, quantity issued and balance remaining.

It also shows the minimum stock levels of the commodity in order to facilitate the ordering of further
supplies.
The cards are usually fixed to a shelf, rack or bin against each item or small box file.

STOCK CARD

Are cards kept in a loose leaf holder or a tray file in stores or cellar.

A card is kept for each item and contains all information on a bin card and details of the re-ordering
quantity for the commodity plus indications to draw attention to low levels.

Stock cards and bin cards should be updated daily and for periodic checks to n=be made that the
balance on the card agrees with the actual quantity of the item held in stores or cellar.

PERPETUAL INVENTORY RECORDS

This means the use of a record card for each item of stock that shows the balance in hand after each
transaction.

In this, all quantities of commodities received and issued are recorded on the appropriate date.

When properly maintained, it is possible to check and record for any items and determine what is at
hand.

Inventory card or record provides the book value of items for comparison with physical stock take.

TRANSFER NOTES

An internal form of requisition used when a department requisitions something from another
department other than the stores and cellar e.g dispense bar may make a transfer note to the
kitchen or kitchen to dispense bar for items like brandy, wines etc.

Any department which sells or issues any item should be credited for the items.

Transfer notes and requisition form act as internal invoices and are sent to the controller at the end of
the day to be entered on the daily issues sheet which would summarise the total amounts of items
used.

BREAKAGES AND DAMAGED GOODS BOOK

Used to record any broken items or goods, dented cans, foods leaked away etc.

The book records:-

The date

Description of item

Where purchased from

The value

Signature of purchasing officer who verifies the damaged goods

The action taken

The purpose of the book is to restrict unexplained difference in actual stock and the

book stock and to make storekeepers aware that management is concerned at any loss of
goods.

Items recorded in this book are officially written off.

NOTE:- In large establishments there should be separate book for food and beverages.

CELLAR STOCK RECORDS

CELLAR INWARD BOOK

It provides accurate reference to all beverages coming into the cellar, and posts data for the cellar
man’s bun card.

BIN CARD

These are provided for each individual type of beverage held in stock and records all deliveries and
issues made.

The cards are fixed on the shelves or racks against each beverage.

CELLAR CONTROL BOOK

This provides a record of all daily deliveries to the cellar and the daily issues of each beverage
from the cellar to various bars.

BEVERAGES PERPETUAL INVENTORY LEDGER

This is a master ledger prepared and held in the control or accounts office.

It consists of cards prepared for each individual beverage held in the stock or cellar room and
used to record full details of the movement in and out of the cellar, the balance of stock in hand
and its value.

This information is obtained from the suppliers’ delivery notes or invoices and the daily beverage
requisition notes from the different bars.

EMPTIES RETURN BOOK

Many of the containers of beverages such as crates, kegs, bee bottles, soda bottles, water bottles e.t.c
are charged by the supplier against a delivery, therefore, strict control should be maintained on
these items.

A record is kept when they are returned to the suppliers and the correct credit note is obtained.

ULLAGES AND BRAEKAGE BOOK

Ullage - term used to cover all substandard beverages such as bottles of weeping wines, bottles
of wines with faulty corks, unfit barrels of beer e.t.c which should be returned to suppliers for
replacement.

Any ullages and breakages should be recorded on a standard form together with an explanation, and
countersigned by a member of the food and beverage management department.

Breakages of bottled beverages usually occur by mishandling by cellar and bar staff.

LIQUOR RETURNS

The store man will issue a liquor stock according to the customer’s requirements, recording the
details on the issue on a bar consumption sheet.

When the bar is closed the stock will be returned to the store, details of all returns will be recorded
on the bar consumption sheet and the amount of liquor consumed is calculated by subtracting the
returns from the issues and priced at cost price and selling price.

The reason for two prices is that the cellar stock is valued at cost price and that the customer must be
charged for the liquor consumed at selling price.

Returns procedures

It is important to establish a returns procedure for unused materials, for three main purposes:-

To prevent the deterioration of materials.

To eliminate the risk of unused materials consumed.

To calculate the true cost of materials consumed.

All returns should be credited to the department concerned and stores records adjusted accordingly.

Departmental returns form should be completed by the stores man in duplicate, one copy for the
stores record and the other for the department returning goods.
 REVISION QUESTIONS

State four objectives of stock control in large catering establishment.

(4 marks)

Highlight four points to consider when determining economic order quantity.

(4 marks)

a) Distinguish between FIFO and LIFO methods of valuing stock.

(4 marks)

b) A record of transactions in regard to rice for Angel Restaurant were as follows:-

January 10 bought 100 kgs at Ksh.30 each

January 14 bought 100 kgs at Ksh.34 each

January 19 sold 80 kgs

January 22 bought 200 kgs at Ksh.40 each

January 28 sold 240 kgs

Required:

Prepare the stores ledger card using LIFO method and determine cost of sales for the month.
(12 marks)

Given that the monthly sales were Ksh.18,000, determine the gross profit percentage for the month.
(4 marks)

Explain four advantages of automated order taking in a high class restaurant.

 (8 marks)

State four disadvantages of central stores.

(4 marks)

The following information was obtained from the books of Faith Nancy caterers

Consumption per week - Minimum 400 buns

- Maximum 1300 buns

- Normal 700 buns

Lead time - Normal 4 weeks

- Minimum 3 weeks

- Maximum 6 weeks

Re-order quantity - 4000 buns

Required:-

Re-order level (2 marks)

Minimum stock level (4 marks)

Maximum stock level (4 marks)

In a 28 day trading period the cost of food consumed was Ksh.9,800, the opening stock on day 1 was
Ksh.4,500 and the closing stock on day 28 was Ksh.2,800.0 calculate the stock turnover.
(5 marks)

Explain any two methods of valuing materials.

(9 marks)

Suggest four qualities of a good food store.

(4 marks)

Differentiate between periodic and continuous stock taking.

(4 marks)
Explain the following store:-

Centralised stores

Decentralised store

Imprest

(6 marks)

During a particular month, the purchases and issues of a certain item of foodstuff were as follows:-

Week Purchases Issues

1 30 items @ Sh.30 25 items

2 40 items @ Sh.32 35 items

3 20 items @ Sh.32 25 items

4 50 items @ Sh.34 40 items

Calculate the monthly value of the consumption using FIFO methods.(13 marks)

Explain how transfer between bars is done.

(5 marks)

The rate of use of flour from stores is 20 bags per year. The cost of placing and receiving an order is
Ksh.40. the cost of each bag is Ksh 100/=. The cost of carrying inventory per year is 0.16 and it
depends on the stock.

Determine:

The Economic order quantity (7 marks)

If lead time is 3 months, calculate the order point. (3 marks)

a) When would it be necessary to transfer food items and beverages within a catering
operation? (4 marks)

b) Describe how transfer system in (a) above. (6 marks)

Enumerate eight responsibilities of a storekeeper.

(8 marks)
a) Tiger restaurant purchased food worth Ksh.7,500. This food was consumed in 28 day
trading period. The opening stock on day 1 was valued at Ksh.1,500 while the closing stock
on day 28 was valued at Ksh.950.

Calculate the rate of stock turnover for the restaurant. (3 marks)

b) State six factors which determine the stock levels of a catering establishment.

(6 marks)

Explain fully what you understand by the following terms used in connection with stock control;-

Re-order level

Safety stock

(4 marks)

Give four reasons that explain the difference between book balance and physical balance
which may arise in a stock-taking exercises.

(4 marks)

Explain any five features of a well-planned store.

(10 marks)

a) State three problems of having a low stock turn-over.

(3 marks)

b) Define the following terms;-

stock taking

stock holding cost (4 marks)

c) Explain five measures that can be implemented to maintain the quality of

food products during storage.

(10 marks)

Prepare a stock ledger sheet using weighted Average Cost method to record the following
transaction. (12 marks)

April 2nd - Balance brought forward is 1000 units at Shs.25.00 per unit
 April 5th - Issued 400 units

April 7th - Received 1000 units at Shs. 27.00 per unit

April 11th - Issued 500 units

April 14th - Issued 800 units

April 19th - Received 1700 units at Shs.30.00 per unit

April 23rd - Received 1000 units at Shs.32.00 per unit

April 25th - Issued 600 units

April 27th - Issued 700 units

April 29th - 900 units

Identify four stock holding cost common to all businesses.

(2 marks)

A restaurant spent Ksh.12,000.00 on vegetables in the month of April. The opening stock on
the 1st of April was Ksh.3,200.00 and the closing stock on 30th April was 20% of the cost of
vegetables.

Required:

Calculate the rate of stock turnover. (5 marks)

References:-
Kotas Richard and Davis Bernard (1986); Food and beverage control, International text book
company ltd, (3rd edition) great Britain. (pg81-100).
Davis B. Et all (2004); Food and Beverage management, Butterworth Heinemann, (3rd edition)
U.k. (pg 105-1..***).
Davis Bernard and Stone Sally (1985); Food and Beverage management, Heinemann Professional
Publishing Ltd, (1st edition), Oxford London. (pg 129-144).
Saleemi Ahmad Nisar (1990); Cost accounting simplified, N.A.Saleemi publishers, Nairobi. (pg
45-70).
Odgers Peter; Purchasing costing and control, Stanley Thornes publishers LTD, London. (pg 22-
47,84-98).
Sethi Mohini (2008); Institutional food management, New Age International publishers. (pg 335-
350).
Ceserani V. Et all (2003); The theory of catering, Bookpower, London. (pg 365-380)
Boardman R.D (1986); Hotel and catering costing and budgets, Heinemann, (3rd edition) London.
(pg 46-56)