Food Production Exam 3

cost of food sold formula

opening inventory + purchases - closing inventory

total food available formula

opening inventory + purchases

the process of acquiring and evaluating foods and services beginning with determining needs through product use, conclusion of contracted service, or the end of the useful life of an equipment

procurement

the process of “buying”; placing and order, receiving a product or service and paying the supplier

purchasing

list the 5 “rights” of effective purchasing

product/service, price, source, quantity, time

a process to determine whether products should be prepared on site or purchased from an external supply source

make or buy analysis

the top level manager in a large hospitality organization who is responsible for the organization’s purchasing function

purchasing director/manager

a staff member in a large hospitality organization with responsibilities to purchase specific lines of products, services, supplies, or equipment

purchasing agent (buyer)

a system in which all or most purchases are made by purchasing agent for the entire organization

centralized purchasing system

a system in which all or most purchases needed by a department are made by department heads or someone within their department who is designated to do so

decentralized purchasing system

positions required in most purchasing processes of a large FSO

kitchen personnel, receiving and storage personnel, purchasing director, accounting department, and supplier

a document signed by a representative of the hospitality operation when products are delivered to transfer product ownership to the property

delivery invoice

a document used to obtain prices from suppliers, and to inform suppliers whose price proposal is accepted that a shipment should be delivered

purchase order

a business transaction in which goods or services are exchanged for other goods and/or services without money changing hands

bartering 

the act of determining the quantities of products to purchase based upon forecasted future prices

speculative purchasing

federal agency that oversees/regulates unfair and deceptive acts or practices

federal trade commission (FTC)

federal agency that regulates food, supplements and other products to ensure safety of American public

food and drug administration (FDA)

federal agency that ensures all meats, poultry and egg products are safe to consume and accurately labeled

US department of agriculture (USDA)

federal agency in charge of food quality protection act which limits pesticides that can be used in production

environmental protection agency (EPA)

federal agency that prevents work-related injuries, illness, and deaths by enforcing safety standards

occupational health and safety administration (OSHA)

agency that works with ATF to regulate production and sale of alcohol beverages

internal revenue services

agency that controls production, labeling, and advertising of alcohol and the relationships among produces, wholesalers, and retailers

bureau of alcohol tobacco and firearms (ATF)

a model set of laws regulating commercial transactions including banking and credit and especially those related to the sale of goods 

uniform commercial code (UCC)

a legal document that allows one to operate a business or provide a service

license

latin for let the beware; the commercial principle that the buyer must check the quality and suitability of foods before purchasing them

caveat emptor

a contract recognized as valid by the courts and subject to the court’s ability to require compliance with its terms 

enforceable contract

a contract in which the elements of the agreement are clearly understood and stated, either orally or in writing

express contract

three elements needed in a legally binding contract

offer, acceptance, and consideration

a promise made by a seller about a product that is a legal part of a contract

warranty

a stated promise about a product or service that is a legal part of a contract

expressed warranty

the proper conduct of individuals as they interact with others based on their own moral principles

ethics

the consistent delivery of hospitality organization’s products and services according to expected standards

quality

all activities that help a hospitality organization to attain quality

quality assurance

an organization wide commitment that focuses on the encouragement and support of quality management in all activities to best meet the needs of employees and customers

total quality management 

three basic types of purchasers

price conscious, quality conscious, and value conscious

believe that cheap is best and buy the least expensive

price conscious purchasers

believe that you get what you pay for- not overly concerned with costs

quality conscious purchasers 

those that want to find the right product; recognize and study the relationship between cost and quality 

value conscious purchaser 

cost to develop a purchase spec that describes a product of proper quality for its intended use

prevention costs

cost incurred to inspect incoming products to ensure they meet the quality requirements

appraisal costs

cost of errors and rework created by inappropriate products 

internal failure costs

cost incurred by using suppliers’ products that were not noticed to be out of compliance with purchase specs

external failure costs 

a tool that describes the quality requirements to be met by products purchased by a hospitality operation

purchase specification

a tactic to compare supplies’ prices for products of acceptable quality to determine the least expensive price

competitive bidding (competitive pricing)

the allowable variation in the weight of a product purchased by weight

tare allowance 

techniques used to increase value for the money spent for a product and/or to increase the satisfaction that the product provides

value analysis

the tendency of people to act differently when they are observed than when they are not being observed

Hawthorne effect

name three issues with excessive quantities 

ties up capital, impacts cash flow, quality deterioration 

name three issues with inadequate quantities

inability to meet production requirements, possibility of disappointed customers, unknown impact on consumer choices that affect sales data

the situation in which a product normally available in a supplier’s inventory is out of stock, and has been ordered from the suppliers own product store

back order

the minimum quantity of specific product that must always be available in inventory 

safety level 

tactic used by supplies or manufacturers to quickly move/sell unwatned inventory by reducing selling prices

closeouts

a system to calculate product purchase quantities that considers the minimum quantity below which inventory levels should not fall and the maximum quantity above which inventory levels should not rise

minimum-maximum inventory system

the number of purchase units used during a typical order period 

usage rate

the number of purchase units used during the time between order placement and delivery

lead time

the number of purchase units that should be available in inventory when an order is placed

order point

a system in which purchase quantities are calculated on the basis of the number of purchase units required to return inventory 

par inventory system 

system including purchasing exact quantities (used for banquets or special events)

exact requirements system

system requiring period assessment of inventory (ex. lightbulbs)

cyclical ordering system

system using several organizations that combine orders for similar quality products and submit one order instead of multiple

cooperative (pool) buying

purchasing system that is typically computerized and looks at costs including price and usage to determine quantities with lowest variable costs

economic order quantity method (EOQ)

set quantity over specified number of deliveries

definite quantity contract

similar to definite but quantity is not fixed

requirements contracts

items purchased from local retail business using petty cash system

open market purchasing 

a carefully controlled process to determine the amount of the as purchased quantity of a product remaining after production loss has occurred

yield test

a manager using sales data from Friday to develop sales estimates for future Fridays

manual systems

a computerized device that records sales and payment information amount numerous other functions

point of sale (POS) system

a purchasing system in which a long term commitment is made with a supplier to make frequent product deliveries so the organization can minimize on site product storage

just in time purchasing (lean purchasing)

any business that sells products to a hospitality organization

supplier

any business which sells services to a hospitality organization

service provider

activities undertaken to determine which suppliers will be requested to quote prices for the products and services to be purchased by the hospitality organization 

sourcing

the person who is the purchaser’s most immediate contact with the supplier

distributor sales representative

a request made by a purchaser to a potential supplier asking for the price that will be changed for products of a specified quality and quantity

request for price quotations

e-commerce interactions between businesses 

business-to-business

a supplier who provides a wide variety of products

broad line supplier (one-stop supplier)

a supplier who offers a deep selection of relatively few products

specialty line supplier

businesses that for a membership fee allow buyers to purchase products in large quantities and often in large purchase unit sizes at prices less than their retail competitors 

wholesale buying clubs

a purchasing alternative in which the buyer travels to the supplier’s site, selects desired products and pays for them at the time of purcahse

cash and carry

a company that is owned by a larger company

subsidiary

traditional views of pricing 

price=quality 

non traditional views of pricing

price and cost are unrelated

the act of charging different prices for the same product (ex. ladies night, senior discount, etc.)

differential pricing

an economic system in which businesses operate without government control in matters including pricing

free market 

a pricing alternative in which buyer and seller agree to a specific price for a defined product or service for a stated time period

contract pricing

the purchasing tactic of using more than one supplier for a specific type of product for the purposes of assuring competitive pricing and better assuring product availability 

split order 

a buyer who purchases only a seller’s lowest-priced products

cherry picker

a transaction in which a buyer pays the full amount owned at the time products are delivered

cash on delivery

a business expense that does not vary based upon the revenues generated by the business

fixed cost

an after purchase discount offered by the product maker or seller

rebate (cash back offer)

a cash fund used to make relatively infrequent and relatively low-cost product purchases

petty cash

general provisions that apply to a supplier’s price quotations and a buyer’s purchase orders regardless of the specific products being purchased or sold

terms and conditions 

contract clauses addressing concerns which do not change in different applications

boiler plate

the transfer of ownership from a supplier to a hospitality operation when products are delivered

receiving

holding products under optimal conditions until they are needed for production or use

storage

an accounting document used to revise information about product quantities and/or initially recorded on a delivery notice

credit memo

a document which separates incoming food costs into components required for daily food cost calculations

receiving report

numerous machine-readable rectangular bars and spaces arranged in a specific way to represent the letters, numbers, and other symbols used to identify a product 

bar code

an electronic wireless tracking system that uses a transmitter to provide non-contact and automatic location of stock throughout the hospitality property

radio frequency identification (RFID)

a receiving method in which receiving personnel are aware of the products but not the quantities to be delivered

blind receiving

the movement of people, products, supplies, placement of equipment, and the design of work areas in ways to encourage productivity 

workflow