Cost of goods sold

From CNM Wiki
(Redirected from Cost of sales)
Jump to: navigation, search

Cost of goods sold (alternatively known as cost of sales or by its acronym; hereinafter, COGS) is a monetary value of costs that are associated with a particular sale or group of sales. COGS may be calculated using one or more methods and include historical costs, freight charges, storage costs, associated direct labor, production expenses, and depreciation.


Definitions

According to College Accounting: A Practical Approach by Slater (13th edition)‎,

Cost of goods sold. Total cost of the goods which were sold to customers.

Components

Costs of the sold products, used raw materials, and allocated expenses may include from one to all of the following:

  • Historical costs.
  • Freight, shipping, and/or other service charges.
  • The cost of storage and handling.
  • Direct labor costs for workers who produced the sold products.
  • Production expenses.
  • Depreciation.

Methods used to value inventory

Main wikipage: Inventory valuing
  • Specific invoice method. Valuing of inventory where each item is identified with a specific invoice.
  • FIFO (first-in, first-out method) Valuing of inventory assuming that the company sells the first goods received in the store.
  • LIFO (last-in, first-out method). Valuing of inventory with the assumption the last goods received in the store are the first to be sold.
  • Weighted-average method. Valuing of inventory where each item is assigned the same unit cost. This unit cost is found by dividing the cost of goods available for sale by the total number of units for sale.

Related concepts

Related lectures