Surely my stock’s value is the same as what it cost me to produce?
Sometimes yes, but not always. Essentially there is a difference between the “cost to produce” and the “value” and this can cause confusion, so it’s important to understand the options and why. The batch cost report and margin reports show you the “cost to produce”, which may be different from the stock’s “value” which is shown in the “Stock valuation” report.
Breww will track the per-litre cost of the beer for valuation purposes and use this on the stock valuation report. This is slightly different to the costings used for margin reports in Breww. This is further explained here at How are batch costings and WIP value calculated in Breww?
The main issue with valuing your stock at its production cost is best illustrated with an example: If you spent £1,000 producing 1,000L of beer and then packaged it into a single 500ml bottle before the rest of the batch was lost for some reason (let’s pretend the valve got stock open the rest was dumped on the floor). If the bottle was valued at the cost to produce, it would be valued at £1,000 - which is clearly not a fair valuation for a single bottle of beer. With the per-litre valuation method, the bottle is instead valued at a much more realistic £0.50, which is why Breww uses this method as the starting point for calculating the initial value.
Wastage options
Breww allows you to customise how you’d like wastage (loss volumes) to affect your valuation of beer stock. This effectively allows you to choose to value your stock at the “cost to produce”, a straight per-litre value, or a sensible middle-ground where an expected wastage is used.
To choose an option, simply head to Reporting → Production & inventory reports → Stock valuations → Valuation settings.
No expected wastage
This option will assume all wastage is unexpected, and any wastage will reduce the valuation of the goods.
Use recipe expected wastage (recommended)
This will look at the expected wastage set on the batch’s recipe and use it to calculate whether you lost more or less than expected. If you lost more than expected, the valuation will be reduced proportionally, and if you lost less than expected, it will increase proportionally.
Ignore wastage
This will completely ignore wastage so that any waste won’t affect the valuation of the goods. The value of the goods will be the same as the cost it took to make the goods.
Why is wastage important in valuing my stock?
As with most things, we find the best way to explain is with an example! Say you had a 1,000 L batch, which cost you £1,000 to make. You expect to package 900 L, which would be a wastage rate of 10%. If everything goes to plan, and you package the expected 900 L, it is fair to say that the value of that stock is the same as what you put in, i.e. £1,000.
However, if something went wrong in the process and you only ended up with a single 440 ml can, it is tricky to say that the can is worth £1,000, even though that’s what it cost you to make it.
Adjusting the calculation based on an expected wastage helps us settle on an appropriate base value. This is why we recommend the Recipe expected wastage method. However, with Breww, you’re free to choose an option that suits you and how your work best.
Resulting stock values
To help you choose the best option for you, we will show you the stock valuation figures that each option would result in using the example above. To recap, you had a 1,000 L batch, which cost you £1,000 to make. You expected to package 900 L, which would be a wastage rate of 10%. You end up successfully packaging 800 L, so less than expected.
No expected wastage
As we’re not expecting any loss, we simply carry through the per litre value of the batch. The batch costs £1,000 / 1,000 L = £1 per litre, so the final value of our stock is £800.
Use recipe expected wastage (recommended)
This method accounts for some wastage but not a limitless amount. So if there is a large amount of wastage, or we’re much more efficient than expected, this will affect the final value of our batch’s stock.
In this example, a 100 L loss was expected, but 200 L was actually lost. Breww first calculates the per litre value based on the expected packaged volume of 900 L, to get £1,000 / 900 L = £1.1111 per litre. This is used to give us a final stock value of £1.1111 x 800 L = £888.89. If we had actually hit our expected packaging volume of 900 L, then the stock would be worth £1.1111 x 900 L = £1,000, i.e. the total amount the batch cost us. If we were amazingly efficient and successfully packaged 1,000 L, the stock would be worth £1.1111 x 1,000 L = £1,111.11, as we would have more to sell than expected.
Ignore wastage
This method ignores wastage entirely. It is the same as valuing your stock at cost, so the 900 L of stock will be worth the £1,000 that the batch costed.
The table below shows the different values generated for different packaging options using the same example of a 1,000 L batch, with £1,000 of costs and an expected wastage of 10%.
| Method | Packaged 300 L | Packaged 800 L | Packaged 900 L | Packaged 950 L |
|---|---|---|---|---|
| No expected wastage | £300 | £800 | £900 | £950 |
| Use recipe expected wastage | £333.33 | £888.89 | £1,000 | £1,055.56 |
| Ignore wastage | £1,000 | £1,000 | £1,000 | £1,000 |
