When it comes to marketing any product, it is a difficult task to define the right price, without However, there are certain accounting guidelines that must be considered in order to do this well. simple. The first of these guidelines is to know the sales cost of each product that you intend to offer.
In this article you will find:
What is cost of sales?
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It is the amount of money you have cost to produce or acquire the products you are going to sell.
The sales costs are not fixed, each product line has its specific cost of sales, which also changes over time since merchandise in inventory depreciates at different rates depending on the characteristics of the product. For example, food can be depreciated over a few days.
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The cost of sales of a service is the amount of money it costs to generate each of the services offered to customers.
When goods are produced or purchased, the costs associated with these goods are accounted for as part of inventory and are treated as an expense within the accounting period while the company records the income received from the sale of the goods.
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To determine costs it is necessary to keep records of all materials and goods purchased, as well as any discounts on the purchase. In the same way, if these goods are modified, the costs of carrying out said modification must be determined, These modification costs include: labor, supplies, supervision, use of equipment, quality control.
How is cost of sales calculated?
In order to calculate cost of sales, First you have to take into consideration whether it is the calculation of products or services, in addition to being a industrial company or of a purely commercial company. Depending on it, the formula to use is totally different.
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Industrial or manufacturing company
For the calculation of sales costs of a manufacturing company the following formula is used:
CV = initial stock + Production cost - finished products
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Essentially, the sum of the products of the initial existence is made, with the total cost of production and then subtracting the finished products.
commercial enterprise
To calculate the sales costs of a commercial company, the formula to be used is the following:
CV = Initial stock + Net purchases - final products
The quantity of products in stock is added, with the net purchases, to then subtract the quantity of products from the final stock.
Elements to consider
To better understand this calculation, we will mention some elements to consider in the selling costs.
- Supplies: Electricity, water, gas and Internet services are a cost that affects sales costs.
- Transportation: Transfer of finished products that can influence the cost of sale.
- Raw material: Buying subject for the production or modification of a final product, that is, the costs of raw materials or products, including freight and shipping costs.
- Technology: Considering the depreciation and maintenance value of the equipment and machinery for the manufacture of the final products.
- Labor: The wages to be paid, that is, all direct labor costs (workers who participate in the productive process).
- The costs derived from the storage of the products that the company sells, either the finished products and even the raw materials before being processed.
- All expenses generated by manufacturing.
When very large quantities are sold or a wide variety of products are handled, the process for determining cost of sales is more complex. For this, inventories are controlled through a permanent inventory system and a system of periodic inventories and each system uses its own procedure to set the cost of sale.
Each of these systems determines the cost of sale of the merchandise, and then proceeds to determine the utility gross, since it is known that the sale value contains a cost to keep abreast of the profit percentage handled.
Conclution
Finally, it is important to highlight the importance of knowing the cost of sale, which is given by its utility, which is nothing more than providing the cost data necessary to carry out the measurement of economic utility within the Statement of income, same as the inventory valuation within the balance sheet.
On the other hand, it serves as important information for the decision making and the process of planning Strategic and last but not least it is useful in the managerial control of the activities and operations carried out by the company.
According to national rules, the cost of sale of any product may or may not vary for accounting and / or tax purposes.
