Cogs or Cost of goods sold are a production cost that must be incurred by the company owner. Where this is very influential in determining the price of goods to be sold. So what does Cogs actually mean?
What are Cost of goods sold (COGS)?
Cogs have an influence in determining the selling price of goods that will be issued by a company. Of course, this starts from the production process to distribution. Cost of goods or cogs are process activities in terms of production in each company. So what are the needs required by a company and how to calculate them?
COGS
Availability of Stock
The stock in question is goods that were produced in the previous month. The cost of inventory or stock of goods is of course calculated based on the number of goods purchased which is reduced by the final result.
Direct Employees
Direct employees are people who are involved in the production process of the merchandise. The payment usually depends on how many products have been obtained in a matter of hours.
There are other rates
For rates in cogs, namely machine depreciation, building rental, packaging, electricity, equipment maintenance and water. The rates vary quite a bit, usually based on the type of business, scale and resources of the company.
If you already know what the company needs, then you can calculate COGS? Here is the procedure for calculating it, namely:
- The company must determine the cost rate at which it will sell.
- Companies must determine operational costs for each item within a certain time.
- The company must also determine an inventory.
- If you already know all the information, you can do calculations using Microsoft Excel.
An example of carrying out these calculations is:
A paper factory called Tiga Jaya is processing books. The raw material inventory in September was IDR 500,0000.
Then make a new purchase with a nominal value of IDR 17,000,000. This was done by 15 employees and the wages received were IDR 16,000,000.
When making this, operational costs of IDR 8,000,000 were incurred every month. Then at the end of the month the raw materials amounted to IDR 9,000,000. So what is the value of Cogs?
IDR 500,000 + IDR 17,000,000 – IDR 9,000,000 = IDR 8,500,000.
The production costs amount to IDR 8,500,000. Those are some of the details of the Cogs that must be issued by business people. So cogs are production that must be issued by business people or companies.
