Usage & Cost Variance Analysis - FAQs

Overview:

If you have created recipes for your menu items (COGS-Well refers to them as "Sales Items"), COGS-Well can calculate what your inventory usage and costs should be (the "Theoretical") based on the ingredients and quantity sold.

COGS-Well also calculates your actual inventory usage and cost (the "Actual") based on your inventory counts and purchases. Theoretical usage and cost can then be compared to Actual to determine any Variances. This process is called "Variance Analysis".

Things to Know:

• Please click this link if you would like to know more about Theoretical Usage and Cost Calculations.
• Variance Analysis enables you to know if you are performing as well as you could be.
• If you have variances, Variance Analysis will help you isolate where the problem(s) are.
• Variance Analysis requires accurate and well-maintained recipes.
• An option is to do a Variance Analysis on key inventory items only.

Variance Analysis:

Variance Analysis is at the pinnacle for a food and beverage cost control system like COGS-Well because it lets you know whether you are performing as well as you should be. It is one thing to determine if you are profitable, but it is usually even better to know if you are as profitable as you could be and if not, what inventory items or cost categories have a usage variance.

Variance Analysis is not easy because it requires very accurate recipes (ingredients and portions) for all of your Sales items. The smaller and more standardized your menu, the easier Variance Analysis is. Variance Analysis is also much easier when you have a resource that can continually maintain recipes.

Variance Analysis Reports:

There are two primary Variance Reports. The Cost of Sales Variance Report compares your actual cost of sales by Inventory Category to your theoretical cost of sales by Category and determines the variance. The report can be run in detail or summary (by Category, Department, and/or Sales & Cost Class) and it can consolidate sites or report multiple sites on the same report. 

The Inventory Usage Variance Report compares actual inventory usage (based on counts and purchases) to theoretical inventory usage (based on Sale Item recipes and the quantity sold) and determines variances. Variances are reported in quantity and dollars.  Variance values can be sorted (highest to lowest) and there is a multi-site version of the report.

Variances for Key Inventory Items Only: 

Variance Analysis is easier if you start by focusing on high-cost or usage inventory items, or items that are easier to monitor (typically items with predictable yields or 100% yields). For example, wines are expensive, they have simple recipes (one bottle or glass), they have 100% yield, and they do not easily spoil. If you report a variance for a wine it is reliable versus something like parsley.

An easy approach to creating Key Item recipes is to use the Recipe Item Tab that displays when you view or edit an inventory item. The Recipe Items Tab can be used to add the item you are viewing to multiple recipe items at one time. You can add the item, the portion size, and the yield for each recipe item. This is normally faster than adding an item as an ingredient in multiple Sales Items.

For example, if you want to track theoretical usage for Ahi Tuna and you use it in several Sales Items, you could view the Ahi Tuna inventory Item, go to the recipe item tab, and then quickly select the Sales Item that Ahi Tuna is used in, and add the quantity (portion size).

Summary:

Variance Analysis provides the unique capability to know if you are performing as well as you should be and if you are not, where the problems may be. We recommend that you balance implementing this capability with what your menu offering and your available resources. Tracking Key Item Variances is a good place to start.