![]() ![]() You may have additional large costs that are not part of a purchase order, but which still need to be allocated to your products in order for your COGS to be reflected correctly. To exclude additional costs from a product's cost, simply set the account for those lines to an expense account that is separate from the account used for the products. To distribute costs according to weight, volume, quantity or independently, see Landed Cost Expense Distribution for how to do this using a Manual Journal. NOTE: Costs are distributed according to the product value. To allocate additional costs to products on a purchase order, make sure that the additional cost account is the same as the inventory account for the products. These costs will increase the stock on hand value of your inventory. If you created a sales order for 15 pieces of the SKU, they will be selected as follows:ġ-10 each each the total COGS will be = 3,725.00ĭEAR allows you to choose whether or not you allocate additional costs to a product's COGS during a purchase. Average cost is not used to calculate COGS or in any other Profit and Loss calculations or in reports.Ĭonsider an SKU with Costing Method FIFO. This is based on all historical purchase costs of that item and is used for estimating/reference purposes only. On some screens, you will see the average cost of an item. ) See Changing the Costing Method for more information. You can change the costing method of an item, and thus how COGS are picked up, from the product detail screen.( Inventory → Products →. Additional costs, manual journals and landed costs can optionally be allocated to a product's cost or instead allocated to an expense account. This is taken from the authorised purchase invoice of that item. Reports filters "only COGs within range" and "All COGS"Īll COGS calculations are done using accounting costing methods such as FIFO or FEFO and are based on the actual purchase cost of a picked item. ![]() It excludes indirect expenses, such as distribution costs and sales force costs.Ĭorrectly calculating the COGS for your inventory is an essential part of working out your margins and profit. This amount includes the cost of the materials and labor directly used to create the good. Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. ![]()
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