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 Message 16136 of 22774 in Behind the Bar
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Subject: Re: Question about liquor costs....
From: Josh
Posted: Mon Sep 4. 2006, 03:43 UTC
Followup to: "Re: Question about liquor costs...."  by Robert Williamson  (Mon Sep 4. 2006, 02:09 UTC)
> Actually in all of my equations a - shows that I am used more product 
> than my sales accounted for.  On the same hand, a + number indicated 
> I have taken more money than product (which is bad.)  All the 
> accountants I have talked to and other businesses do their numbers 
> this way.  They show a - for loss and a + for gain.  So when my 
> retail pour is $100, and my sales are only $90, there is a -$10 
> variance in sales.  Why would I state this as a +$10 in sales?  

You're talking about different numbers here. Liquor Cost Variance has nothing 
to do with sales. It's the difference between what was used and what was 
expected to be used based on some system in place that tracks this (POS 
system, Sales receipts etc) - or in other words, the difference between Actual 
usage and Theoretical usage. 

If we've overused product, then it will be displayed as a + percentage. Why? 
Well, because OVERused doesn't translate into a "minus" because OVER is a 
postive element.

If we've underused product, then it will be displayed as a - percentage. Same 
deal - "uder" is a negative element. 

So, when you're referring to Variance Percentage (I think this is where you're 
getting confused, you're thinking dollars, I'm thinking a percentage of 
overuse/underuse based on sales) overuse = +, underuse = -.

Here's an example of your method:

"We overused liquor by -.05% on $10,000 in sales". In this scenario, when 
factoring the equation to see how much liquor, in $, was overused you would 
end up with $9995.95 (-.05% x 10,000). That makes absolutely no sense, does it?

I find this a bit more clear:

"We overused liquor by .05% on $10,000 in sales". In this scenario, you would 
end up with $500 (10,000 x .05%) - which is the correct amount.

You need to think about this percentage on it's own. It's not part of a line 
by line spreadsheet where other factors are considered. Obviously when you're 
doing your weekly numbers, that .05% liquor cost variance would translate into 
a negative dollar amount, but we're not talking about a dollar amount here. 
We're talking about what is the percentage of liquor that was 
overused/underused based sales (percentage being the keyword).

So, when I think about Liquor Cost Variance (or Beer Cost Variance, or Wine 
Cost Variance, or Bar Consumables Cost Variance, or Paper Goods Variance....) 
I think of the difference between what IS and what is EXPECTED expressed as a 
percentage. I think the above examples proove that your logic simply doesn't 
express this correctly.


-- 
Cheers! - Josh @ BarSim
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