Chapter 13 — Exercises

Items marked † have worked solutions in the answers appendix. Everything else is yours to defend.

Unless a problem says otherwise, use Bellwether's plan figures: annual revenue \$1,550,000 at 72% food / 28% beverage, so \$1,116,000 of food sales** and **\$434,000 of beverage sales; food-cost target 30.0%, pour-cost target 22%; food order guide \$6,438 a week / \$334,800 a year; dinner Tuesday–Saturday plus two brunches; forecast dinner covers 62 / 74 / 88 / 118 / 133 = 475 a week at a 0.90 entrée attachment. The Hearth Chicken's frozen cost card: chicken \$5.60 (half a 3.5 lb bird at \$3.20/lb), roots \$0.95, salsa verde \$1.05, butter and aromatics \$0.42, oil/salt/misc \$0.18, garnish \$0.15 = \$8.35**; plus a 2% waste allowance = **\$8.52; menu price \$29.00**; food cost **29.4%**; contribution margin **\$20.48.

A. Recall and definitions

13.1 In one sentence each, distinguish a broadline distributor, a specialty distributor, and a direct purchase. Give one item from Bellwether's order guide that each is the right channel for, and say why.

13.2 What is the difference between an order guide and a par sheet? Can a restaurant have one without the other, and what breaks if it does?

13.3 † List the seven receiving checks in order and state, for each one, what specific loss it prevents. Then say which one you would drop first if you genuinely had only fifteen minutes, and why.

13.4 Define FIFO in terms of a physical action rather than a principle. Why is the physical formulation more likely to survive a busy Tuesday morning?

13.5 What is a credit memo, and what are the four rules governing it? Which of the four is most often skipped, and what does skipping it cost?

13.6 Explain the difference between shrinkage and waste. Can a restaurant have shrinkage with no waste? Waste with no shrinkage?

13.7 Why does this chapter insist that a count sheet be printed in shelf order rather than alphabetically? Name two costs of getting it wrong.

13.8 A prime-vendor agreement is described as cost-plus. What single contractual definition determines most of the deal's value, and what three questions would you ask about it?

B. Applied reasoning

13.9 † Chapter 10 sized the poultry program as twenty-six birds and twenty-six birds. Chapter 13 orders twenty-four and twenty-eight. Explain precisely where each of the two numbers comes from, and explain why the total is unchanged. Then state the general rule this illustrates about the difference between sizing a program and writing an order.

13.10 Bellwether's trout carries a safety stock of two fish and its bread flour carries a full 50 lb bag. Both are on the same par sheet. Justify the asymmetry using two dimensions other than price.

13.11 An operator argues that because their inventory turns 92 times a year — 4.0 days on hand — they are running the tightest purchasing operation in their market. Give three specific costs their turnover number cannot see, and describe the evidence you would ask for before agreeing.

13.12 † The chapter claims that cross-utilization changes the correct size of a safety stock, not merely the cost of getting it wrong. Explain the mechanism in your own words, then apply it: for which two of Bellwether's eight programs would you carry the thinnest cushion, and why?

13.13 A restaurant's food cost has been between 29.6% and 30.2% for six consecutive weeks and its waste log has recorded zero entries for four of those weeks. Is this good news? What would you check first?

13.14 Why does this chapter treat a rising cash-and-carry line as a purchasing-system defect rather than a purchasing strategy? Under what circumstances would that judgment be wrong?

13.15 Explain why receiving is described as "the only moment when you can still say no." Name two other moments in a restaurant's week that have the same structure — a short window of total control followed by a long period of none — and say what they have in common.

C. Cost this

13.16 † A Friday delivery of 28 birds is billed at 112.00 lb, catch-weight, at \$3.20/lb. (a) What was the average bird weight, and is it in spec (3.25–3.75 lb)? (b) What was the invoice line? (c) What should the line have been at the 3.50 lb spec target? (d) What credit do you request at the door? (e) If the halves are plated as they come, compute the new component total, the new plate cost with the 2% allowance, the new food cost percentage, and the new contribution margin. (f) State, in dollars, what one uncorrected year of this would cost on 4,992 Hearth Chickens.

13.17 Compute the annual cost of Bellwether's poultry program at \$3.20/lb, and express it as a percentage of the food order guide and as a percentage of food sales. Then recompute all three if the poultry price moves to \$3.55/lb, and state what you would do about the menu price — including the case for doing nothing.

13.18 † Bellwether's walk-in drifts from 38°F to 45°F and stays there for eleven weeks before anyone notices. Assume average food inventory of \$6,025, that 70% of it is in the walk-in, and that the temperature costs an additional 2% of walk-in inventory per week. (a) What is the weekly cost? (b) The eleven-week cost? (c) What is the annualized cost in points of food cost, on \$1,116,000 of food sales? (d) A coil cleaning and a gasket cost \$400. How many weeks is the payback, and what is the one-year return on that \$400?

13.19 One week's waste log at a different restaurant shows: SPOIL \$142.60, OVERPREP \$310.15, TRIM \$88.40, REFIRE/DROP \$61.85. Food sales that week were \$34,900. (a) Total the log and express it as a percentage of food sales. (b) Annualize it. (c) Rank the four categories by which one you would attack first, and justify the ranking on expected recovery rather than size.

13.20 † Compute Bellwether's inventory turnover and days on hand from these figures: beginning food inventory \$6,340, ending food inventory \$5,780, gross purchases \$6,905, credits applied \$185, transfers out to bar \$110, transfers in from bar \$25, food sales \$22,410. (a) Food used. (b) Food cost percentage. (c) Average inventory, weekly turnover, annualized turnover, days on hand. (d) The two shortcut answers (gross invoices ÷ sales and net purchases ÷ sales), and an explanation of why they differ from the true number in the direction they do.

13.21 An over-order of ten percent runs across a restaurant's \$4,600 of weekly perishable lines. Fifteen percent of the excess ages out. Compute the annual spoilage cost and the annual cash tied up in the elevated average inventory, and explain to a skeptical chef-owner why the second number is not the same kind of loss as the first.

D. Build this

13.22 † Build the poultry par for a week in which the covers forecast is revised to Tue 58 / Wed 70 / Thu 95 / Fri 126 / Sat 141, with the entrée attachment unchanged at 0.90 and the Hearth Chicken at 22.4% of entrées. Deliveries remain Tuesday and Friday. Produce: the per-night chicken forecast, the Tuesday par, the Friday par, the weekly bird order, the weekly cost, and the number of halves available for Sunday hash. Keep the same safety-stock logic and state where you rounded.

13.23 Write the product specification for Bellwether's whole trout [T-01]. Use every field from the chapter's spec table. Two of the fields will be harder than they were for chicken — identify which, and say what you would have to learn from a supplier before you could fill them in honestly.

13.24 Design a one-page receiving log for Bellwether: the columns, the exception codes, who signs it, where it lives, and where it goes at the end of the shift. Then state the single number you would extract from it monthly and what you would use that number for in a vendor conversation.

13.25 † Build the twelve-line key-item count sheet for Bellwether. For each line give the count unit, the section it lives in (A–E from Figure 13.7), and the reason it earned a place on a list of twelve. Then estimate how long the count takes and defend the estimate.

13.26 Reorganize the walk-in map in Figure 13.7 for a restaurant that has no separate beverage storage, runs a raw bar, and receives fish daily. State what changes, what cannot change, and why.

13.27 Take Bellwether's order guide and mark each of the eight programs as commit (put it in a prime-vendor agreement) or shop (keep it out). Total the annual spend on each side, and write the two sentences you would say to a broadline salesperson to open the negotiation.

E. Diagnose this

13.28 † A restaurant's period-end numbers: beginning food inventory \$11,400; gross food invoices \$41,850; credits applied \$0; ending food inventory \$14,900; food sales \$126,000. The owner reports food cost of 33.2% and is furious. The chef says nothing has changed. (a) Compute the true food cost. (b) Explain the gap. (c) Name the three most likely causes of the inventory movement, ranked. (d) State what you would ask for before doing anything at all.

13.29 Three consecutive periods at the same restaurant show food cost of 29.1%, 33.8%, and 29.4%. Purchases and sales were stable throughout. Give the two most likely explanations that have nothing to do with food, and describe the single test that would distinguish them.

13.30 † Read the following four facts together and produce a diagnosis with an order of investigation: (i) prepped inventory in section D has run \$260–\$310 above the production sheet's implied value for five straight weeks; (ii) the waste log shows almost no OVERPREP entries; (iii) family meal has been unusually elaborate; (iv) food cost is 0.6 points above target. State what is almost certainly happening, what it is costing, and the two fixes in order.

13.31 An operator's variance report shows \$2,150 of unexplained usage. Their instinct is that somebody is stealing. Using Chapter 11's investigation order and this chapter's material, write the sequence of checks you would run first, with an estimate of how long each takes and what it would prove or rule out. Say explicitly at which point suspicion of a person becomes reasonable.

F. Write this

13.32 Write the email you send to a broadline salesperson at 8:05 a.m. on the Friday in Figure 13.6, after accepting immersion-chilled birds under protest. Two hundred words maximum. It must accomplish three things — secure the credit, restore the spec for Tuesday, and preserve the relationship — and it must not contain the word "unacceptable."

13.33 † Write Bellwether's one-page Receiving Policy for the staff handbook: who receives, when, what they check, what they are authorized to reject without calling the chef, what they must escalate, and what they do with the paperwork. It has to be usable by a person on their second shift.

13.34 Write the two paragraphs of the business plan's Purchasing & Inventory section that a skeptical reader will actually weigh: the vendor structure and the control cadence. Do not use the words "quality" or "relationships."

G. Judgment

13.35 A driver you have known for eight months is thirty minutes behind and asks you to sign the invoice without opening the cases, promising to fix anything wrong on Monday. He has always been good for it. What do you do, what do you say, and what does your answer cost you if you are wrong in either direction?

13.36 † Your produce supplier's owner is a friend of the chef-owner. Their fill rate has been poor for two months, three deliveries have been short without credits, and the chef will not raise it. The plan's food cost is 0.5 points over target and about half of that is traceable to produce. Describe how you would handle this — what you would document, whom you would talk to, in what order, and what you would be prepared to do if nothing changes. Then state the version of this problem where the chef is right and you are wrong.

13.37 A line cook tells you privately that a colleague has been taking home leftover proteins at the end of Saturday shifts, and has been doing it for months, and that "everybody does it." Walk through what you do — including what you do not do first — and identify where this chapter's material ends and Chapter 34's begins.

13.38 Bellwether can reduce its food cost by roughly 0.6 points by switching from whole air-chilled birds to pre-portioned frozen halves at a slightly higher per-pound cost but with no butchery labor, no livers, no rendered fat, and no Saturday carry-over for the hash. Make the strongest case for the switch, then the strongest case against it, and say what additional number would settle it. Reference prime cost explicitly.

H. Business Plan extension

13.39 Extend the Business Plan's Purchasing & Inventory section with the piece this chapter left open: a preventive maintenance schedule for refrigeration. Specify what gets checked, how often, by whom, what it costs annually, and what it protects — in dollars, using §13.5's arithmetic. Then state where in the three-year pro forma the cost belongs.

13.40 † Bellwether's opening inventory is budgeted at \$9,200 food and \$11,500 beverage against a \$35,000 pre-opening budget that also carries pre-opening labor, training, and licensing. (a) Explain why the opening food inventory is deliberately set above the 6.4-day steady-state level. (b) Build the argument for reducing it to \$7,500, including what that would cost operationally in the first three weeks. (c) Build the argument for raising it to \$11,000. (d) State which you would recommend, what additional information would change your mind, and which later chapter has to resolve the tension.