Inventory Variance: Formula, Report and Causes

By mise · Updated September 29, 2026

Quick answer: inventory variance = counted quantity − expected quantity (beginning + received − used/sold). Expressed in dollars and as a percentage of usage. Under 1–2% is good; above 3–5% needs a look at waste, portioning, receiving and theft.

The variance report is the most useful inventory report you can run. It tells you what is missing and where to look.

Example: expected 42 lb of chicken, counted 36 lb. Variance −6 lb × $3.20 = −$19.20 (−14% of usage). Check portions and receiving.

Variance calculatorExpected quantityCounted quantityUnit cost ($)

Variance: —

Common causes

Unrecorded waste.
Over-portioning.
Receiving errors.
Theft.
Counting or unit errors.

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Frequently asked questions

What is an acceptable inventory variance?

Under 1–2% of usage for most items; spirits and proteins should be tighter.

How do I reduce variance?

Waste logs, portion tools, checked deliveries and weekly counts of A items.

What is a variance report?

A list of items with expected vs counted and the dollar difference.

How much does mise cost?

A 7-day free trial, then US$33 a month per location (£26 in the UK).