NHM 373 Exam 2 Questions And
Answers
What is inventory? - ANS record of material (food and supply) assets owned b y the
operation
What is inventory control? - ANS process of maintaining items in storage in desired level
What is the purpose in managing inventory volume? - ANS indicates what products/items
to order -- when to order -- quantity to order
What is determing the amount of inventory influenced by? - ANS desired inventory level --
the inventory turnover rate -- the average inventory value (budget) --the "lead" time
What is inventory turnover? - ANS a measure of how quickly food in storage is ued
What shoul the operation's ordering procedure reflect? - ANS the inventory turnover rate of
the operation
What is the average turnover rate of food? liquor? - ANS 20 -- 8.5
What are the two inventory level rules-of-thumb? - ANS inventory values should equal no
more than 1percent of total annual sales volume -- inventory values should not be more than
approximately one-third of the average monthly product sales
What is the purpose of conducting inventories? - ANS Measures mtg's effectiveness --
provides accurate information of food and supplies in stock -- helps determine purchasing needs
-- provides info for cost -- prevention of losses
What is physical inventory? - ANS periodic actual counting and recording of products in
stock in storage
When does physical inventory usually done? How many people do it? - ANS end on the
month -- 2 person with one that is't involved in storage
What do you record with physical inventory? - ANS records quantity, unit size, name of
item, unit cost, total value
,How often does physical inventory must be done? - ANS miniumum one time per year
What is perpetual inventory? - ANS continuous record (running tally) of all purchases and
products in stock
What is perpetual inventory usually best for? - ANS expnsive and highly perishable
products
What must perpetual inventory be verified with? - ANS a physical inventory on a monthyl
basis
What does perpetual inventory control? - ANS overbuying and underbuying
What is Just In Time Inventory? - ANS philosphy and strategy to buy products just in time
for production/service and immediate consumption w/out having to record inventory
What is Just In Time Inventory good for? - ANS money is not tied up & fresher products
What is the equation for Computing Food Cost from Inventory/ - ANS Beginning Inventory
+ Purchases (total) = Cost of Food Available - ending Inventory = Cost of Food Used (sold) -
Cost of foods not sold = Cost of FOod Sold (Sales)
What is always smaller: Cost of Food Sold or Cost of Food Used? - ANS Cost of Food Sold
is always smaller than Cost of Food Used
What is the equation for food cost percentage? - ANS (CFU/Sales)X100 = FC%
What is the equation for Avg inventory? - ANS total inventory vaue/Number of time
inventoried
What is the length of a period determined by? - ANS the operation and can be as short as
one week or as long as one year
Why was inventory higher than the previous year? - ANS food waste could have increased,
people could have stolen more, etc.
What is the Inventory Turnover activity ratio of? - ANS measuring the number of times per
period, a business sells and replaces its entire batch of inventory again
What is the Inventory Turnover formula? - ANS cost of goods sold/average inventory
What does high turnover rate mean? low turnover rate mean? - ANS low turnover implies
poor sales and therefore excess inventory --- high ratio implies either strong sales or ineffective
buying
, Why is low turnover a bad sign? - ANS products tend to deteriorate as they sit in a
warehouse
What type of company will have very high turnover? - ANS selling perishable items
What are the types of inventory controlling methods? - ANS par stock approach --
economic order qty -- ABC mtd
What is the ABC mtd? - ANS based on principle that effort time, and money for inventory
control be allocated to producsts according to value
What are the ABC mtd products dividing into? - ANS A - high value --- B- medium value --
C-low value
What are the 5 methods for inventory valuation methods? Which one is used most often? - ANS
specific item cost -- weighted average -- first in first out -- last in first out -- latest purchase priece
------ latest purchase price
Why are inventory values subject to change? - ANS product usage and product
replacement
Why is the method chosing for valuing inventory is important? - ANS the law requires that
an approved method be used by all businesses for tax purposes -- the value represents a
liability on the Income Statement -- it will affect the dterminetaion of proice of menu items sold,
and thus proft and loss figure -- suppliers will offer a larger discount if the inventory value is
large
What is issuing? - ANS process to supply items to production or service after receiving
What are direct issues? - ANS items sent directly for receiving to prod/serv without sroage
What types of foods are used for direct isseus? - ANS usually highly perishable/live items
What is storeroom issues? - ANS items issued form storage area when
needed/requisitioned
What must happen with storeroom issues before they are moved? - ANS without
authroization
How many cans of soup does 1-#10 can? - ANS 5.32 soup cans
Answers
What is inventory? - ANS record of material (food and supply) assets owned b y the
operation
What is inventory control? - ANS process of maintaining items in storage in desired level
What is the purpose in managing inventory volume? - ANS indicates what products/items
to order -- when to order -- quantity to order
What is determing the amount of inventory influenced by? - ANS desired inventory level --
the inventory turnover rate -- the average inventory value (budget) --the "lead" time
What is inventory turnover? - ANS a measure of how quickly food in storage is ued
What shoul the operation's ordering procedure reflect? - ANS the inventory turnover rate of
the operation
What is the average turnover rate of food? liquor? - ANS 20 -- 8.5
What are the two inventory level rules-of-thumb? - ANS inventory values should equal no
more than 1percent of total annual sales volume -- inventory values should not be more than
approximately one-third of the average monthly product sales
What is the purpose of conducting inventories? - ANS Measures mtg's effectiveness --
provides accurate information of food and supplies in stock -- helps determine purchasing needs
-- provides info for cost -- prevention of losses
What is physical inventory? - ANS periodic actual counting and recording of products in
stock in storage
When does physical inventory usually done? How many people do it? - ANS end on the
month -- 2 person with one that is't involved in storage
What do you record with physical inventory? - ANS records quantity, unit size, name of
item, unit cost, total value
,How often does physical inventory must be done? - ANS miniumum one time per year
What is perpetual inventory? - ANS continuous record (running tally) of all purchases and
products in stock
What is perpetual inventory usually best for? - ANS expnsive and highly perishable
products
What must perpetual inventory be verified with? - ANS a physical inventory on a monthyl
basis
What does perpetual inventory control? - ANS overbuying and underbuying
What is Just In Time Inventory? - ANS philosphy and strategy to buy products just in time
for production/service and immediate consumption w/out having to record inventory
What is Just In Time Inventory good for? - ANS money is not tied up & fresher products
What is the equation for Computing Food Cost from Inventory/ - ANS Beginning Inventory
+ Purchases (total) = Cost of Food Available - ending Inventory = Cost of Food Used (sold) -
Cost of foods not sold = Cost of FOod Sold (Sales)
What is always smaller: Cost of Food Sold or Cost of Food Used? - ANS Cost of Food Sold
is always smaller than Cost of Food Used
What is the equation for food cost percentage? - ANS (CFU/Sales)X100 = FC%
What is the equation for Avg inventory? - ANS total inventory vaue/Number of time
inventoried
What is the length of a period determined by? - ANS the operation and can be as short as
one week or as long as one year
Why was inventory higher than the previous year? - ANS food waste could have increased,
people could have stolen more, etc.
What is the Inventory Turnover activity ratio of? - ANS measuring the number of times per
period, a business sells and replaces its entire batch of inventory again
What is the Inventory Turnover formula? - ANS cost of goods sold/average inventory
What does high turnover rate mean? low turnover rate mean? - ANS low turnover implies
poor sales and therefore excess inventory --- high ratio implies either strong sales or ineffective
buying
, Why is low turnover a bad sign? - ANS products tend to deteriorate as they sit in a
warehouse
What type of company will have very high turnover? - ANS selling perishable items
What are the types of inventory controlling methods? - ANS par stock approach --
economic order qty -- ABC mtd
What is the ABC mtd? - ANS based on principle that effort time, and money for inventory
control be allocated to producsts according to value
What are the ABC mtd products dividing into? - ANS A - high value --- B- medium value --
C-low value
What are the 5 methods for inventory valuation methods? Which one is used most often? - ANS
specific item cost -- weighted average -- first in first out -- last in first out -- latest purchase priece
------ latest purchase price
Why are inventory values subject to change? - ANS product usage and product
replacement
Why is the method chosing for valuing inventory is important? - ANS the law requires that
an approved method be used by all businesses for tax purposes -- the value represents a
liability on the Income Statement -- it will affect the dterminetaion of proice of menu items sold,
and thus proft and loss figure -- suppliers will offer a larger discount if the inventory value is
large
What is issuing? - ANS process to supply items to production or service after receiving
What are direct issues? - ANS items sent directly for receiving to prod/serv without sroage
What types of foods are used for direct isseus? - ANS usually highly perishable/live items
What is storeroom issues? - ANS items issued form storage area when
needed/requisitioned
What must happen with storeroom issues before they are moved? - ANS without
authroization
How many cans of soup does 1-#10 can? - ANS 5.32 soup cans
