![]() ![]() On the flip side, items that are excluded from COGS include selling, general and administrative expenses such as distribution costs to customers, office rents, advertising, accounting and legal fees, and management salaries. Most of these are the variable costs of making the product-for example, materials and labor-while others can be fixed costs, such as factory overhead.Ī good litmus test to determine whether something should be included in COGS is to ask: Would the cost exist if no products were produced? If the answer is no, then the cost is likely included in COGS.Įxamples of costs generally considered COGS include: Tax rules allow an expanded version of COGS, which can reduce tax liability.ĬOGS includes all direct costs incurred to create the products a company offers. ![]()
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