Theoretical vs actual cost
The theoretical cost represents an estimate or forecast of the cost, calculated before the actual activity.
RESTOCK uses the term "**theoretical**" because only an inventory can determine what was actually used. For example, if the point-of-sale item "Spaghetti" is linked to a portion of the RESTOCK recipe "Spaghetti with Meatballs," which contains: 200 grams of pasta, at a cost of 1.00$, and 150 grams of sauce, at a cost of 2.00$, the theoretical cost of the spaghetti portion would therefore be 3.00$.
The actual cost, on the other hand, corresponds to the cost actually incurred during the activity.
Continuing with the example used earlier, instead of following the quantities listed in the recipe, the employee who prepared the portion of spaghetti used 215 grams of pasta and 200 grams of sauce. Therefore, the reality is that we sold a portion of spaghetti with an actual cost of 3.74$, compared to the forecasted 3.00$. The $0.74 difference represents the gap between the actual and the theoretical costs.
Ideally, a restaurant owner wants to minimize these gaps, as they represent shortcomings in the restaurant's operations. These can be caused by several factors, including inaccuracies in recipe preparation, unreported losses, theft, or inventory errors.
To compare theoretical vs. actual quantities as well as cost discrepancies, regular inventories are necessary. These inventories allow for the generation of the "Theoretical vs. Actual Usage" report in the "Theoretical Cost" section of RESTOCK reports.
Note that this report is only available for time periods that include both an opening and a closing inventory snapshot.
RESTOCK uses the term "**theoretical**" because only an inventory can determine what was actually used. For example, if the point-of-sale item "Spaghetti" is linked to a portion of the RESTOCK recipe "Spaghetti with Meatballs," which contains: 200 grams of pasta, at a cost of 1.00$, and 150 grams of sauce, at a cost of 2.00$, the theoretical cost of the spaghetti portion would therefore be 3.00$.
The actual cost, on the other hand, corresponds to the cost actually incurred during the activity.
Continuing with the example used earlier, instead of following the quantities listed in the recipe, the employee who prepared the portion of spaghetti used 215 grams of pasta and 200 grams of sauce. Therefore, the reality is that we sold a portion of spaghetti with an actual cost of 3.74$, compared to the forecasted 3.00$. The $0.74 difference represents the gap between the actual and the theoretical costs.
Ideally, a restaurant owner wants to minimize these gaps, as they represent shortcomings in the restaurant's operations. These can be caused by several factors, including inaccuracies in recipe preparation, unreported losses, theft, or inventory errors.
To compare theoretical vs. actual quantities as well as cost discrepancies, regular inventories are necessary. These inventories allow for the generation of the "Theoretical vs. Actual Usage" report in the "Theoretical Cost" section of RESTOCK reports.
Note that this report is only available for time periods that include both an opening and a closing inventory snapshot.
Updated on: 02/12/2024
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