Calculating an Accurate Cost of Goods Sold (COGS) for Lottery Sales
Tip
Ensuring the correct Margin value is set for your
lottery department in CDBWin
Margin values are set up differently for lottery sales
depending upon whether you ring up the items in your lottery
department as "direct department sales" or as
"item sales." This ensures an accurate cost of
goods sold (COGS) calculation, which is important because
COGS affects how gross profit (GP) is calculated which, in
turn, affects how net profit (NP) is calculated (Sales
- COGS = GP - Expenses = NP).
Direct Department Sales
When handling lottery items as direct department
sales, set up your lottery department with a margin
that accurately reflects what you make on these items.
Individual item cost cannot be used because in these cases
no item is being tracked (purchased, sold, inventoried).
Therefore, the default margin you set for the department
is used instead. For example, if you are making $.06 on
a $1.00 ticket, on the Setup menu, click
Department/Account. On the "Departments"
tab, in your lottery department's Margin box, type
6.00. This assures the correct calculation of the
COGS for your lottery direct department sales.
Item Sales
If lottery items in your store are handled as item
sales, it means each is resident in the CDB's inventory
file with the cost. Therefore, when you post the sale of an
item, CDBWin calculates the profit margin using the item's
cost and retail. However, there may be times when your
lottery item sales were not tracked (for example, a cashier
may have mistakenly rung the sale as a direct department sale
or your item sales file may not have been available when you
booked the sale). In these cases, to safeguard against the
COGS being applied twice for the sale (once using the margin
for the department sale and once when a physical inventory
is taken and the CDB finds a variance between lottery book
and physical quantities), SSCS suggests using a default
margin of 100.00 for your lottery department.
On the Setup menu, click Department/Account,
on the "Departments" tab, in your lottery
department's Margin box, type 100.00. If you
normally track the purchase, sale, and physical inventory
adjustments of items in your lottery department, then
having your lottery department's Margin set to 100% prevents
a COGS from being tracked for the department sale, while
allowing the COGS to be tracked from the physical inventory
adjustment. The amount of the variance found during a physical
inventory should represent all the items sold (assuming
also there was no breakage, spoilage, or theft) and ensure
an accurate COGS. If you track the purchase and sale of the
item but do not track physical inventory adjustments of the
item, then you will need to set the Margin to the percentage
that reflects your profit for the times when the item sale
cannot be tracked.
This concept applies to any department where you are
recording the item sales or not recording the item sales.
Lottery is being used as an example in this tip because
there are a significant number of users that track all
the inventory in their stores by "item" except
for lottery.
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