Inventory Management
Product Costs
How Cinchio Back Office works out product costs, where to see them, and how theoretical and actual margins compare.
Can't find what you need? Contact Cinchio:
About Costs
Cinchio Back Office updates product costs on a last cost basis.
Supplied products
A Supplied product's cost at a site comes from the first of these that exists:
1. Supplier order
The latest one in the past 30 days.
2. Cash purchase
The latest one in the past 30 days.
3. Transfer in
The latest one into the site in the past 30 days.
4. Supplier pack
The cost on the most recently added enabled supplier pack.
Recipe products
A Recipe product's theoretical cost at a site is the total cost of its Supplied ingredients. So the cost you see depends on where you're logged in:
A standard site
The latest theoretical cost at that site.
Head Office
A general theoretical cost, based on the latest cost in the product setup.
Next
See where to find costs in the Viewing Costs tab, or how they affect margins in Theoretical vs Actual.
Viewing Costs
See product costs in your reports, or a recipe's theoretical cost and margins on its product page.
Reports
Product setup
You can also see a recipe's theoretical cost, and the margin it leaves at each price, on the product page.
1
Go to Product Management > Products, find the product and select EDIT.
2
The theoretical cost is on the Recipes tab.
3
For margins, select PRICES & COSTS in the Additional Product Information section at the bottom. The theoretical cost is shown against each price level, with the margin for each price.
Theoretical vs Actual
A key inventory measure is comparing theoretical gross profit margin with actual gross profit margin. Gross profit margin, often just called margin or GP, is sales less costs, usually shown as a percentage of net sales so it's easy to compare.
Theoretical cost
What it should cost to sell the product, based on supplier costs and the recipe.
Actual cost
What it did cost, based on the stock counted at the start and end of the period and the movements in between.
The aim is to keep the gap between them as small as possible. Any gap is a loss. Some of it is known, such as declared wastage or preparation losses. The rest is unknown, and shows as period variance.
Looking into a gap?
Find out how to analyse the difference between theoretical and actual margin.
Which do you want to understand?
Theoretical cost of sales
Every Recipe product has a theoretical cost, based on its ingredients. When it's sold, that cost is recorded against it in the transaction. At the end of the stock period, these costs add up to the period's total theoretical cost of sales.
Example
Net sales of £2,000 and a theoretical cost of £500 give a theoretical GP of £1,500. As a percentage of net sales, that's 75%.
Keeping theoretical costs accurate
Theoretical figures are only as good as your inventory setup. To keep them accurate:
Actual cost of sales
The actual cost of sales is worked out at the end of a period, from the counts and movements recorded:
Example
An opening stock of £1,000, purchases of £1,500, net transfers of −£250 and a closing stock of £1,700 give an actual cost of sales of £550.
With net sales of £2,000, the actual GP is £1,450. As a percentage of net sales, that's 72.5%.