Product Cost Information

Cinchio Back Office product costs are updated on a last cost basis. 

The cost of a Supplied product at a site is based on: 

1. The cost in the most recent supplier order in the past 30 days. If no supplier order exists: 
2. The cost in the most recent cash purchase in the past 30 days. If no cash purchase exists: 
3. The transfer in cost of the most recent transfer into site in the past 30 days. If no transfer in exists: 
4. The cost stored against the most recently added supplier product that is stored against the supplied product and marked as 'enabled'.

The theoretical cost of Recipe products at each site are based on the sum of the cost of its Supplied components. 

Therefore: 

• When logged into a standard site, you see the latest theoretical costs of the product at that site. 
• When logged into the Head Office site, you see a general theoretical cost based on the latest cost configured within the product setup.

Viewing Product Costs

Reporting

Inventory costs are available in various reports, including:

• For supplier costs against Supplied products, see: Supplied Products.
• For theoretical Recipe costs at a site, see: Recipe Products. 
• For cost price history of a Supplied product at a site, see: Cost Price Analysis.

Product Setup

You can view a theoretical Recipe cost at a site in the product page. 

Head to Product Management > Products, locate the product and then select [EDIT]

The theoretical cost is shown in the Recipes tab. 

You can also see the theoretical margin against each available price for the product.

In the Additional Product Information section at the bottom, select [PRICES & COSTS].

The theoretical cost is shown alongside each price level for the product, displaying a theoretical margin per price. 

Costs Explained

Theoretical vs Actual

If you're reasonably new to F&B inventory, a key inventory reporting metric is the comparison of Theoretical Gross Profit Margin versus Actual Gross Profit Margin.

The Gross Profit Margin is often referred to as just Margin or GP, and is the value of sales less costs, typically displayed as a percentage of net sales for easy comparison. 

The cost can be either Theoretical or Actual: 

• Theoretical Cost is based on what it theoretically costs to sell the product based on the supplied cost and recipe setup. 
• Actual Cost is based what stock you physically have counted at the start and end of the period, taking into consideration movements declared throughout the period. 

The aim is to have as small a gap between the Theoretical and Actual as possible. 

Any difference between the two is considered a loss, where this loss may be known (e.g., through declared wastage or food preparation) or it may be unknown (i.e., period variance). 

More information on analysing the difference between the two is available in This Article. 

Theoretical Cost of Sales

Each Recipe product has a Theoretical Cost. This is based on the cost of the ingredients.

When a product it sold, the recipe Theoretical Cost is assigned to the product within the transaction.

At the end of a stock period, the sum of all costs for all transaction throughout the period generates a total Theoretical Cost of Sales for the period. 

Using net sales from those same transactions, Theoretical Gross Profit Margin is calculated using:

Net Sales - Theoretical Cost of Sales = Theoretical Gross Profit Margin

For example, when:

• Theoretical Cost = £500
• Net Sales = £2000

...the Theoretical Gross Profit Margin is £1500.

Often, the margin is displayed as a percentage of net sales for easy comparison.

In this example, the Theoretical Gross Profit Margin can be represented as being 75%.

The aim is to be as accurate as possible when generating theoretical values, and this is done through accurate and efficient inventory configuration.

Things which can be done to help this include: 

• Supplier prices should be accurate and kept up to date.
• Recipes should be precise with correct ingredient quantities and costs.
• Supplier orders should be checked and received in promptly.
• Sales from the POS and remote sources should be recorded in real-time.

Actual Costs of Sales

The Actual Cost of Sales is calculated at the end of a period is based on declared counts and movements.

This is calculated based on: 

• The value of stock at the start of the period. (Same as the value of stock at the end of the last period.)
• + the cost of supplier orders and cash purchases
• + the cost of transfers in
• - the cost of transfers out
• - the value of stock at the end of the period. (Based on the stock count.)

For example, if: 

• Opening Cost: £1000
• Purchases Cost: £1500
• Transfers Cost: -£250
• Closing Cost: £1700

...then the Actual Cost of Sales​​​​​​​ is £550

Using net sales from transactions throughout the period, the Actual Gross Profit Margin is calculated as:

Net Sales - Cost of Sales = Actual Gross Profit Margin

For example, when:

• Actual Cost = £550
• Net Sales = £2000

...the Actual Gross Profit Margin is £1450.

Often, the margin is displayed as a percentage of net sales for easy comparison.

In this example, the Theoretical Gross Profit Margin can be represented as being 72.5%.