How to calculate the cost of sales? To reduce the labor intensity of determining this indicator, costs are classified according to certain criteria.
Based on their impact on the production process, costs are divided into direct and indirect .
For example, the costs of purchasing materials and equipment and the wages of personnel creating the product are direct, while the costs of marketing activities and organizing advertising campaigns are indirect.
According to the criterion of connection with the volume of production, costs are divided into variable (change depending on the quantity of the product produced) and fixed (stable costs that do not depend on deviations in the production cycle).
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Formula for calculating the cost of sales
A simplified formula for determining the cost of sales is as follows:
Cost of sales = Production expenses + Selling expenses.
There are options for a more accurate calculation of the coefficient taking into account unsold products:
Cost of sales = Production expenses + Commercial expenses + (Balance of unsold products at the beginning of the reporting period - Balance at the end of the reporting period).
If the company specializes in construction, then work in progress serves as a clarifying parameter.
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Methods of Cost of Sales Analysis
After calculating the numerical values of the coefficients, an analysis of the cost of sales is carried out. The following methods are the most popular.
Custom method
This type of analytics allows you to determine the costs for each production order. It is not possible to forecast the cost of sales with its help. The value can only be established after signing a contract with the client.
The preliminary value of the cost of sales indicator when posting in the reporting accounting documentation (if such a need arises) is entered by analogy with a similar product that was produced earlier.
The order method is applicable to companies specializing in the production of original or complex products with a long and multi-stage technological process (for example, automotive equipment, aerospace products). As a rule, the batches of goods are small in number, and their composition is determined by the terms of the contract.