Stock valuation wastage options

Breww allows you to customise how you’d like wastage (loss volumes) to affect your valuation of beer stock. To choose an option, simply head to ReportingProduction & inventory reportsStock valuationsValuation settings.

Wastage options

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

This is great guys, thanks so much for adding this feature and all the flexibility it allows.

We’ll be using the ‘Ignore Wastage’ option to value our packaged stock and I just had a suggestion if there were going to be any additions to this feature in the future. After doing some research and speaking to a friend who works in manufacturing, it seems a lot of businesses will use the total cost of materials/ingredients when valuing their finished/packaged stock i.e. ignoring wastage, unless the value of that finished stock exceeds the market value of the goods/selling price. If we’re using ‘Ignore Wastage’ in our Breww valuations, would it be feasable in the future to add an extra option to this to value ignoring wastage unless the unit cost exceeds the standard selling price for that product?

Thanks

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Thanks, Jack, this is useful to know. We’ll see if we can add this extra option as a safeguard against the value becoming unreasonably high :+1:

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