Concepts included in cost of sales

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:47

Under the cost should be understood as the costs aimed at performing various works, manufacturing products or providing specific services. Typically, this concept includes the costs associated with the production of manufactured goods. Sometimes this indicator is calculated taking into account the selling and management costs that are allocated to each unit of production.

Thus, the cost consists of various indicators: the cost of paying workers, depreciation of fixed assets, etc.

What is selling products at cost?

Cost of sales is an important accounting indicator that comes after revenue. Financial results from sales also include other management expenses.

So, this concept is based on the costs incurred by the company to sell its products. It also includes transport and other services of organizations from outside. In addition, the goods sold provide another indicator, presented in the form of cost of goods sold. It consists of the cost of producing a product, its marketing, and management.

That is why every entrepreneur is interested in the question related to how you can calculate the cost of sales. The formula used to calculate this concept is as follows: the cost of raw materials, materials, components + direct labor costs.

Objectives and Importance of Cost of Sales Management

Cost of sales management is an important management process. It is influenced by such factors as the structure of output, production volume, distribution of costs, cost accounting, quality of the goods produced, and so on.

Product cost analysis is an important criterion that characterizes the economic efficiency of the production process.

Analysis tasks

Cost of sales allows you to accurately calculate not only the future profit of each enterprise, but also determine what the profitability of the organization will be.

The task of analyzing this concept plays an important role in the financial report of costs, their study, planning and control.

Thus, the cost of sales analysis provides the CFO of the firm with all the necessary information related to the costs of the enterprise and management personnel.

In addition, this indicator allows you to identify opportunities to improve the efficiency of the use of labor, material and financial resources during the production, supply, and marketing of products.

Management and analysis of this process consists of the followingstages:

• cost planning;
• cost control.

Since the cost of sales is an important micro- and macro-indicator, economists take into account all the costs of the company to calculate it. After all, only minimal costs and maximum revenue will provide the company with a high net profit, and therefore make the enterprise profitable.