How to determine the cost of goods

The cost of goods includes the sum of all costs involved in its production and sale: raw materials, fuel, materials, equipment, salaries, transportation costs, etc. The cost of goods is calculated to determine the price of goods and calculating the profitability of the enterprise.

You will need

• - the cost of manufacturing a unit of goods;

• - the price of the goods sold;

• - the volume of production.

Instruction manual

1

To determine the cost of goods you need to calculate all the costs spent on creating a unit of production. At the same time, it is customary to group all costs according to cost items, which are conditionally divided into direct and indirect. Direct costs include raw materials and fixed assets, salaries, fuel. Indirect expenses include maintenance and operation of equipment. There are several methods for calculating the cost of goods.

2

The classic calculation of cost involves the determination of costs, which vary in proportion to the volume of production. Representatives here are raw materials, materials, components, technological energy, piecework wages. All these costs are summarized and divided into specific types of products.

3

The second option for calculating the cost of goods is expressed through the definition of variable costs for the manufacture of each unit at the cost rate. After that, the absolute value of costs is divided by the volume of this type of product.

4

You can calculate the cost of goods using margin analysis. It uses the ratio of prices for products sold and variable costs for its manufacture. This is expressed by the formula:

"unit price-unit costs per unit / unit price."

5

The cost of goods sold is deducted from accounting in three ways: at the cost of each unit, at the average cost or at the cost of the first goods and the time of purchase. Today, the most common method of writing off goods sold is at the cost of each unit. In retail, goods are recorded at selling prices using balance sheet account 42 “Trade margin”.

6

In economic science, the total cost (the ratio of total costs to the volume of production) and marginal cost (the cost of each subsequent unit of production) are distinguished.