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Cost of Goods Sold


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Not sure where to post this please forgive if in wrong place...

Have Products file. right now we store the Unit Cost right in each product record. But it's a guess. Then that cost is hard-coded as part of the lineitem when sold. All fine and dandy. But it's never accurate.

See, we purchase 100,000 boxes and 50,000 cartons of bubble wrap. I'm trying to figure how to attach our ACTUAL costs onto products. It seems that I want to track inventory on boxes and bubble, etc. also but owner thinks that's not possible. Yeah, it'll be tough.

Question please ... how do others try to match and handle their Cost of Goods Sold? Accountant is being an Accountant (picky) and says our figures are off. We aren't sure on the best way to attack this problem. See, boxes order may last 3 years, but bubble on 1. The only thing I know for sure is the cost at the time of sale must be written as part of the lineitem. We used to have this as a lookup but it grabbed current costs where was incorrect.

Any thoughts or advise would really be appreciated. I thought of entering all materials costs directly into a db then somehow allocating to products but Im lost on it. Help please all you nice people. smile.gif

Pete

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Hi,

That's surely where your accountant, instead of being picky, could be "introduced" in the developing phase.

Anglo-Saxon Accounting differs from mine, but the cost of good sold is surely related to the method you're using, either LIFO or FIFO.

In my solution, which is far from being an accountant bullet proof system, the cost of good sold is solidely dependant on the cost of good purchased. Then, services added to the sale would affect the ending cost of good sold, as well as some depreciation of stocked items...

Does it help in any way ?

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Pete:

From what I understand, you've got a set price for items in stock, but then when you sell something, the set cost goes into the line item, but it's not accurate. Why is this? I mean, if you buy 50,000 cartons of bubble wrap, what cost goes in there? The total? Then, when you sell (or use) a carton of bubble wrap, are there other costs associated with the sale/use?

It's hard to come up with a solution without understanding a bit more of what you're looking at. For me, if you've got 50,000 cartons of bubble wrap taking up shelf space for a year, there is an additional cost beyond the price you actually paid for the bubble wrap itself. You're going to have to create some kind of calculation, but what that will be, it's hard to say at this point.

-Stanley

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Hi there Ugo. Remember me? Well, maybe its because youre french and im a backwoods farmboy but I have trouble understanding you sometimes. smile.gif

Can we try?

What is LIFO or FIFO?

I can enter the invoices for materials we collect to manufacture. Then I can enter the costs of boxes etc (shipping materials and freight costs, etc.) and enter those invoices also. and I think I can decide, okay, use a price from boxes Supplier invoice from always minimum of 8 months back. And use prices from bubble and peanuts from 4 months back. Those kinds of things.

Then if I had a file with this stuff with date - and indicated 'expiration' date sorta, then Products can use the 'appropriate' supplier invoice for each item. Is this what you are meaning or something else. But yes, it's helping me thank you. smile.gif

P

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LIFO and FIFO aren't french ! laugh.gif

LIFO = Last In First Out

FIFO = First In First Out

In very generic terms, that's how you evaluate the cost of stocked items sold.

Say you have these Product x in stock, with the respective dates of entry

Quantities----DateReceived----Cost/unit-----Remaining

11/10/2003--------20------------------ 45---------------0

12/10/2003--------50------------------ 40--------------- 10

01/10/2004--------150-----------------35---------------20

02/10/2004--------70-------------------35---------------30

So, now imagine you need to ship 10 items x to a customer.

If you use the LIFO method, then as it said, you'd ship the item out of stock with its newest purchase cost (the last cost that was entered), so 35.

If you use FIFO, then obviously, you'd use the oldest cost (in stock)--> 40.

Am I clear ? Am I even right on this explanation ?

crazy.gif

I'd never would have thought I'd be teaching accounting one day laugh.gif

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Hi Stanley thanks for helping. smile.gif

I know, it's difficult to figure thats why i was wondering what other people do. Right now, owner comes up with some figure and plops them on the records. But accountant said he was $70,000 off on Cost of Goods Sold this year. accountant just looks at AP (where we pay the suppliers for raw materials, manufacturing bottles & labels, boxes and peanuts etc for shipping and freight costs. He says we're way off. I figure one reason is that when we do report, it uses figures from products but that's current figures. owner updates them twice a year. But half the inventory should have been costed out at the prior unit cost. But that doesn't account for all of it.

a year supply of buble takes little space -put up in rafters in warehouse. Same with boxes. we buy when we get good deals. usually doesn't last more than two years before we run low and need to reorder but sometimes owner has attic full because of deals he gets.

Were first in first out, Ugo. smile.gif i asked owner how he came up with figures and he just looks at invoice for boxes (example) figures box and packing needs and then he shook his head and said he plugs figures in on each product depending up % of retail (and totalling all his supplier costs for the year) divided into that total $.

I just hoped you all had some formula or procedure to do this. I've heard the term Cost of Goods Sold many times throughout my long life (yuk) but just never paid attention. I wish I would have. smile.gif

Pete

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