If you are engaged in the production or resale of certain goods, then for you the cost of sales is one of the most important indicators of the profitability of a particular product. To calculate this cost, you need to determine the price of the inventory you have at the beginning and end of the tax year.
Who needs it?
Cost of sales is an important indicator for those people who are engaged in wholesale or retail trade, direct production or entrepreneurial activity associated with the purchase or sale of goods for profit. Thus, this concept does not in any way apply to people who are engaged in entrepreneurial activities in the field of personal services, including lawyers, doctors, painters or carpenters, if they do not trade in various supplies or materials.
How to make calculations?
Cost of sales is the result of detailed calculations over a specified period of time. In order to determine it, you need to know the following indicators:
- The price of the inventory you have at the beginning of the year. In the event that it differs from the price of the inventory present at the end of the previous year, you should attach a detailed explanation.
- The cost of all kinds of purchases, those goods that were taken by you for personal use are excluded from here.
- Costs that have been set aside to pay employees. You should also exclude any amounts allocated only to yourself.
- The price of materials, as well as any necessary supplies.
- All other costs.
Having defined all these parameters, you can calculate the cost of sales. These are the most important metrics that should be included in your reporting.
To calculate, you need to add up all of these characteristics and also determine the value of the inventory present at the end of the year. It is enough just to subtract from the value of the inventory that you have at the end of the year, the sum of all the above indicators - and you will be able to determine the cost of sales of products.
Inventory price at the beginning of the year
If you work in the trade, then the price of your initial stock will be the value of all the goods you have at the beginning of the year and which you are going to sell to buyers. In the event that you are engaged in production, then for you this indicator will represent the total cost of all kinds of semi-finished products, raw materials, finished products and any supplies you need in the production process.
Initial inventories in the majority of cases are absolutely identical to those that were present at the end of the previous year, but if you have discrepancies in these indicators, you should determine the reason for them in the form attached to your tax return.
Donation to charity
In the event that your company donates its own goods to charity, you can deduct from the tax base either the fair market value of all donated products, or their base - it all depends on which indicator is lower. The donated item base is all sorts of inventory costs you incurred in previous years that you would otherwise have to include in your starting inventory price for that year. You will need to subtract the price of all donated items from the starting inventory value, as it is not part of the cost of goods sold.
In the event that the value of all donated items was not included in the price of initial stocks, the base of donated products is zero, and you do not have the right to deduct this donation from the compiled tax base. In this case, the value of such products is posted using standard accounting methods.
Illustrative example
You are a taxpayer who uses a standard calendar tax year and accrual technology. In 2015, you decided to donate property to a certain church, fair market price which is 600 euros. According to the rules, in the price of ending inventory for 2014 you included the cost of acquiring this property in the amount of 400 euros, and in the same year you deducted administrative and other costs in the amount of 50 euros attributed to this property from the tax base. ... You have spent these costs as business-related costs.
For 2015, you can only deduct this donation from the tax base in the amount of 400 euros, as 200 euros is the amount that would be your regular income if the property were sold by you at a fair market price. Cost price products sold base your gross income calculations will not need to include that € 400, so you can deduct it from the total opening price of inventory for that year.
Deduction of goods that were taken for personal use
If your primary business is trading, you will need to deduct the value of all items you purchase to sell. In the case of manufacturing activities, it will be necessary to take into account the full cost of raw materials, parts or assemblies required to manufacture your final product.
Discounts
The difference between the price originally published and the actual value of the product paid by the customer when purchasing it is called the sales price discount. When calculating the cost of the purchased products, you need to use the prices that were not originally published, but those prices that were actually paid. Accounting for cost of sales does not include the indication of the amount of discounts as a separate item of gross income.
Therefore, the car dealer must deduct any factory discounts from the cost of the cars sold when calculating the cost of the cars sold.
What are the discounts when buying with cash?
An Instant Cash Discount is an amount that a vendor allows you to deduct from your invoice for a product you purchase, and use it as an instant pay incentive.
When calculating the cost of sales of a service or goods, you can fix these discounts using one of the following technologies accounting:
- credit them to a certain discount account;
- deduct them from the total purchases for a given year.
Regardless of which method you will use, you need to do everything consistently and systematically.
If such discounts are credited to a separate account, you will need to indicate the credit balance in the amount of total business income at the end of the tax year. It should be noted that the use of this method does not provide for the deduction of the discount from the cost of goods sold.
Withdrawal from sales
If certain goods are withdrawn from sale for personal use or for the needs of your family, their value must be deducted from the total price of goods purchased by you for sale. For this, when the cost of sales will be calculated, the invoice must contain the cost of these goods in credit for sales or purchases, and this amount must be deducted from your expense account.
The latter is a separate account for keeping records of entrepreneurial income, which is withdrawn to pay any personal expenses of the entrepreneur or his family.
Salary
In the overwhelming majority of cases, when the cost of sales is calculated, the calculation of labor costs is considered as a separate element of the cost of goods sold only at enterprises engaged in the mining or manufacturing industries. Small trading companies often do not have their own labor costs, which provide for the possibility of attributing them to the cost of goods sold. In companies engaged in the manufacturing industry, any labor costs necessarily include not only direct, but also indirect costs necessary for processing raw materials into finished products.
Remuneration for production employees
When the cost of sales is calculated (the calculation formula was indicated above), this item includes the salary of all workers who were employed in a particular production of this product for a full working day. It is worth noting that this category also includes the salaries of part-time employees if you have the opportunity to calculate this component of their salaries.
Other costs associated with wages
These costs must be deducted from the compiled tax base as administrative or trading costs, since it is impossible to calculate the cost of sales according to the rules with the inclusion of these costs. The only type of labor costs that, in accordance with the rules, can be taken into account when calculating the cost of goods sold, is the remuneration of auxiliary and production employees, as well as various labor costs considered as overhead costs.
Materials and supplies
All kinds of materials and supplies, including various chemicals and components required for the production of a particular product, must be recorded when the cost of sales is calculated. The postings of chemicals and parts that do not go into production are treated as deferred expenses deductible from the tax base as standard business expenses (depending on the use of these materials).
To determine the productivity of the company, they calculate and analyze various indicators characterizing different sides activities, for example, profit from sales, proceeds, cost of sales, etc. One of the most important is the cost of sales - a value that gives an idea of the level of production efficiency.
Cost of sales of products is all costs incurred by the company for the release of products that were sold in the reporting period. This indicator is added up from the cost of manufactured products and the difference between stocks of finished products at the beginning and end of the period under consideration, and expresses the total amount of the company's use of available resources. The economist, considering this indicator, plans to provide resources by establishing a share of the cost to replace them, thereby making the output process renewable.
The profitability of the cost of sales for different time periods, as well as the assessment of its size upon sale, allows the analyst to draw a conclusion about the advisability of purchasing goods and materials and using all types of company resources. In addition, the estimated values of the cost in different periods make it possible to analyze the volume of costs and identify reserves for their reduction in the amount of profit.
Cost of sales components
The cost of sales of an enterprise is a value that combines the full direct costs of the firm at all stages production process and other costs associated with implementation. To determine the cost of sales take into account such costs as:
- Direct costs of materials sent to the release of goods;
- Shop workers' wages;
- Manufacturing;
- Non-production;
- Unfinished production;
- Finished products.
The formula for calculating the cost of goods sold
To determine the indicator of the cost of sales, it is necessary to calculate the total cost of manufactured products for the reporting period and take into account the balances of unsold products at the beginning and end of the period.
Calculation formula for a manufacturing company:
C pr = C floor + KR + O start - O k,
where C floor is the total cost of manufactured products,
КР - business expenses,
About beginning and About to - balances of unsold finished products at the beginning and end of the reporting period.
With a continuous production cycle, the balance of work in progress at the beginning and end of the reporting period is taken into account.
The total cost is made up of the costs:
- for raw materials and supplies;
- on the salary (with deductions) of the shop personnel directly producing the product;
- for depreciation of involved fixed assets;
- related to the management and organization of production and the entire company as a whole;
- associated with the preparation and development of production of new types of products;
- related to the sale of released products;
- non-production, i.e. aimed not at production, but at the accompanying actions - packaging, transportation, storage and creation of the necessary conditions for this, payment of commissions, licenses, patents, etc.
The total cost of products sold is the aggregate of all production costs for the analyzed period, taking into account the balances of products not sold in this period. This indicator characterizes the level of use of the resources available to the company.
The sale of products can be accompanied by additional costs - planned or unforeseen, for example, the cost of advertising or marketing services. Such expenses are called sales expenses, and they are also included in the cost of the product.
Cost of sales: an example of a calculation in a manufacturing company
Let us demonstrate the calculation of the cost on the example of the activities of the production association OOO Metizy. It is necessary to calculate the cost of goods sold for September 2018. According to accounting, the cost of unsold products as of 01.09.2018 is 20,300 thousand rubles, as of 30.09.2018 - 12,000 thousand rubles. There are no remnants in the work in progress.
- We will collect all the costs for the release of products made in a month, that is, we will calculate the full cost price:
- The sale of products was accompanied by advertising campaign(commercial expenses), the cost of which amounted to 25 thousand rubles.
- Let's calculate the cost of sold products:
C pr = 20210 + 25 + 20300 - 12000 = 28535 thousand rubles.
Example of calculating the cost of sales in a sales organization
The formula for calculating the cost of sales in trade is different:
C pr = P dr + PZ + Z start - W k,
where P dr is the purchase of goods for sale,
ПЗ - direct costs,
Z beginning and Z to - stocks at the beginning and end of the period.
The purchase of goods is understood as the amount of net purchases, i.e. purchases minus the cost of returned goods and realized discounts, and direct costs include costs for internal transportation, customs duties, excise taxes, insurance, etc.
Example
Let's calculate the cost of sales of the store, if there is such data:
- Stocks of goods as of 01.09.2018 - 200 thousand rubles;
- Purchase of goods for sale - RUB 10,000 thousand;
- Return of goods per month - 356 thousand rubles;
- Transportation of goods - 420 thousand rubles;
- Customs duty - 850 thousand rubles;
- Stocks as of 01.10.2018 - 360 thousand rubles.
Purchase of goods amounted to 9644 thousand rubles. (10,000 - 356).
Direct costs - 1270 thousand rubles. (420 + 850).
Cost of sales: (9644 + 1270 + 200 - 360) = 10,754 thousand rubles.
In order to maintain sales volumes, companies may sell below cost of goods. This is not prohibited by tax legislation, but it should be borne in mind that in some situations the tax authorities may charge additional tax. This is possible in relation to transactions related to controlled ones - the tax authorities can check them for compliance with market prices, and if the price turns out to be lower, the tax will have to be recalculated (Article 105.3 of the Tax Code of the Russian Federation).
In accounting, the cost of sales is formed on account 90/2. The cost of sales account 90/2 reflects by transferring to it the costs associated with the production of products accumulated in the production accounts (20,23,25,26,29) or costs in trade (44) when closing the indicators for the month.
In management analysis, total cost is calculated in order to determine the total cost of manufacturing a product. This indicator allows you to understand how profitable the organization is, and how to pricing goods. Let's figure out what exactly the costs of manufacturing products include the full cost and in what order such a calculation is carried out.
The cumulative total cost of the SOE shows the total volume of all resources spent on production and commercial, that is, sales related costs. Figuratively speaking, this is an assessment of all the costs of manufacturing a product and its sale - from the initial production stage to the final delivery to the consumer. The total cost price usually includes the following types of costs:
- Production - consists of material, raw materials, fuel and energy, labor, depreciation, social and other costs directly expended in the production of SOE and its delivery to the warehouse of the organization. This group also includes the amounts of taxes, credit interest, rent, consulting, advertising, legal, auditing and other services received from outside.
- Commercial - consists of costs associated with transportation, packaging, storage, advertising in order to sell the manufactured SOE and bring it to the end-consumer market.
- General production - for the maintenance of the main, auxiliary, service industries.
- General business - to ensure the successful operation of the entire enterprise. They may not directly relate to production cycles, but without them, the successful functioning of a business is impossible.
Regardless of which classification group the costs belong to, calculating the total cost of production means taking into account all costs - whether they are fixed or variable, overhead or direct costs. For calculation, overhead costs are allocated depending on the selected distribution base. The total cost of goods sold is a gross indicator that characterizes the costs of the entire volume of manufactured products, or a single indicator showing how much costs were spent on the production of one product.
Reduced cost is the costing of products based only on direct, variable costs associated with the production of SOEs. With this option of accounting, general business expenses, which are considered conditionally fixed, as ordinary costs are immediately credited to financial results, without using accounts 20, 29 or 23 (PBU 10/99). The reflection of such indirect costs is made by the accountant on the account. 44 or 26 depending on the type of activity of the organization. At the end of the period, the collected amounts are subject to full write-off to the account. 90.
The abbreviated version of the calculation of production greatly simplifies accounting and does not in any way affect the determination of the final result of economic activity. But this method distorts the data and does not always allow you to accurately calculate how much money the company cost to manufacture a product or provide a service. In addition, only the full cost of goods sold enables managers to carry out long-term planning, analysis and control of production to increase the profitability and profitability of the business. The method used should be consolidated in the accounting policy of the company.
How to find the full cost price
The total cost of the manufactured products of the enterprise is equal to the monetary value of the total costs. In the calculations, the raw materials, financial, labor and other resources spent in the production process are estimated, as well as the costs of selling and storing goods. The obtained value helps to understand how expensive the manufacturing of the GPU was for the company. To know how to calculate the total cost of production, it is necessary to determine the financial indicator by summing up.
Costing is done by adding up production costs, sales costs, and general business costs (if any). After the calculations, it becomes clear at what level to set prices for goods or services so that the company can recoup the manufacturing costs and start a new production cycle, that is, work without loss. Carrying out in-depth analysis the structure of expenses allows you to identify reserves for saving resources and more efficient use of them. Next, we will consider, using examples and formulas, how the total cost of GP is determined.
How to calculate the total cost of production - formula
We have decided that the total cost of production is all the costs of the enterprise. Therefore, in order to make a correct calculation, it is necessary to add up all the costs. For this, the following is used. general formula calculating the total cost of production:
Full cost price = PS + CP, where:
PS is the value of the production cost, and SR is the volume of sales costs.
The above formula is generalized and understandable to those who have already come across the costing of products. If you do not know what the terms are composed of, check out the expanded formula that looks like this:
Total cost price = SMR + PF + FER + ZOP + ZAUP + A + SV + PPR + SR + TR + RPS, where:
SMR - material and raw material costs;
PF - semi-finished products spent in production;
FER - fuel and energy costs;
PDO - salary of personnel of main and auxiliary industries;
ZAUP - the salary of the administrative and managerial personnel of the company;
A - the accrued depreciation of the used fixed assets;
SV - the amount of accrued insurance premiums;
PPR - the amount of all other production costs;
СР - the amount of sales expenses;
TR - transportation costs;
RPS - the amount of other sales costs.
An example of calculating the total cost of a GP
To make it clear what the total cost of production of an enterprise is equal to, consider an example on a specific organization. Let's say a company makes electrical equipment. The expenses incurred during the period are shown in the table below. We will make the calculation of products in two ways - at full cost, and also reduced. In the end, we will calculate the financial indicators from the activity.
Table of economic indicators for calculations
| Indicator name | Value in rub. |
| 75000 | |
| Labor in rubles | 160000 |
| General production in rubles | 25000 |
| General business in rubles | 40000 |
| The total volume of production in pcs. | 50 |
| Total sales in pcs. | 40 |
| The final price of one unit of production in rubles. | 11000 |
Costing table - the calculation is done in two ways
| Indicator name | Full cost option | Reduced cost option |
| Material costs in rubles | 75000 | 75000 |
| Labor in rubles | 160000 | 160000 |
| General production in rubles | 25000 | 25000 |
| General business in rubles | 40000 | – |
| The total cost of the GP in rubles. | 300000 | 260000 |
| Unit cost of GP in rubles. (for 1 pc.) | 6000 (300000 / 50) | 5200 (260000 / 50) |
| The value of the cost of the sold SOE in rubles. | 240,000 (6,000 x 40) | 208000 (5200 x 40) |
| The value of the cost of SOE balances at the end of the period in rubles. | 60,000 (6,000 x 10) | 52000 (5200 x 10) |
Profit calculation table for the production activities of the organization
Thus, from the example it can be seen that the full cost of goods sold allows you to take into account all the costs incurred by the enterprise and more accurately set the price indicator in order to ultimately receive a large profit.
Features of the full cost method
In assessing recurrent costs, the full cost method has been designed to establish a fair price for the items produced. If the enterprise produces various products (types of goods), the responsible employees must first divide all costs by responsibility centers, that is, places of origin. Then you establish cost objects for their allocation. Finally, for each specific product, the costs are attributed depending on the production need.
The calculation process is quite complex and usually unites the work of several specialists. For the accuracy of calculations for products, estimates and rates for writing off costs are developed, prices are determined at which costs are written off, and at the final stage, indicators are analyzed and monitored. Like other techniques, the full cost method has its advantages and disadvantages. The pluses include the elimination of market monopolization, since with this option for calculating goods, the price for the consumer is set on average at the same level. At the same time, sellers get the opportunity to realistically assess their costs and calculate the optimal cost of products to make a profit.
Among the shortcomings, it should be noted that such a methodology does not take into account the existing competition in the current market, therefore, the existing demand for products is not taken into account in the calculations. And the change in the level of costs with fluctuations in production volumes is not amenable to planning. In addition, the attribution of fixed costs to the cost of products or services may somewhat distort the influence of a particular product on the financial result of an organization. Which method of calculating the manufactured products to choose is up to each organization independently.
It is possible that for some purposes (or external users) it will be necessary to calculate the cost according to traditional full indicators, and for others - according to reduced or combined ones. When choosing, one should take into account the specifics of the activity, the nature of the products produced, seasonality, time planning and other factors. The most widespread method of full cost accounting was obtained in small companies, as well as where a narrow range of products are produced. If the range is significant, and the business is large, it is recommended to use aggregate methods and techniques for calculating the cost of GP.
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In modern conditions of implementation economic activity at enterprises of various industries, the problem of reducing production costs, increasing profits and production profitability remains relevant. In this regard, the responsible section of accounting at the enterprise is the calculation, costing.
Concept and what is included in the cost
The cost of production is understood as the totality of all costs produced by an economic entity for its production. The composition of costs included in the cost of production includes:
- the amount of raw materials or materials spent in the production of products;
- the amount accrued by a production worker engaged in the production of products, wages s (both main and additional);
- the accrued amounts of deductions to off-budget funds from the amount of wages of industrial workers engaged in the production of products;
- the amount of fuel and electricity consumed in the production of a certain type of product;
- the amount of expenses for the development and preparation of production of new types of products;
- the amount of general production and general business expenses attributed to a certain type of product in accordance with the calculated coefficient;
- costs that were incurred for packaging, transportation of a certain type of finished product, and other costs.
To calculate the cost of production, it is necessary to add up all the costs associated with its production and sales.
Cost: Formula
It should be noted that the following types of costs can be calculated:
- production;
- complete.
When calculating the production cost, it includes all production costs, excluding sales costs (selling expenses).
To calculate the total cost, the calculated production cost is increased by selling expenses (selling expenses).
Production cost - calculation formula (1) of production cost:
S / S production = M + P - V + E + T + ZPos + ZPdop + Report + RPOP + PB + PR + OPR + OXR, (1)
where M is the cost of raw materials and supplies;
P - costs for semi-finished products;
B - the amount of returnable waste;
E - electricity costs;
Т - fuel costs;
ЗПосн - the cost of paying the basic wages of workers engaged in the production of products;
ЗПдоп - the cost of paying additional wages for workers involved in the production of products;
Report - the amount of contributions to funds, which are off-budget, on the basic and additional wages of production workers;
RPOP - the amount of expenses for the preparation and development of production;
PB - the amount of losses from marriage;
ПР - the sum of other costs;
ODA - part of general production costs;
OXR is a part of general operating expenses.
The total cost is calculated using Formula 2:
C \ C full = C \ C production + RK, (2)
where С \ С production - production cost;
RK - commercial expenses.
Calculation of the cost of production in production: an example
Consider an example of calculating the indicator of the cost of production based on the initial data presented in table 1.
Table 1. Initial data for determining the cost of production, thousand rubles.
| Index | March 2017 | April 2017 |
|---|---|---|
| 1. Raw materials and materials | 456356 | 480679 |
| 2. Purchased semi-finished products | 127568 | 187654 |
| 3. Returnable waste | 20679 | 21754 |
| 4. Energy costs for technological purposes | 4580 | 4860 |
| 5. Fuel costs for technological purposes | 2467 | 2070 |
| 6. Basic wages of production workers | 34578 | 35560 |
| 7. Additional wages of production workers | 11098 | 10655 |
| 8. Contributions to off-budget funds in the amount of basic and additional wages of production workers | 13795 | 13957 |
| 9. Expenses for the development and preparation of production of new types of products | 3560 | 3890 |
| 10. General production costs | 6777 | 7132 |
| 11. General operating expenses | 7907 | 7698 |
| 12. Selling expenses (selling expenses) | 3540 | 4135 |
| 13. Production cost (1+ 2 -3 + 4 + 5 + 6 + 7 + 8 + 9 +10 +11) | 648007 | 732401 |
| 14. Full cost price (13 + 12) | 651547 | 736536 |
The calculated total cost (indicator 14) reflects the sum of all costs for the entire volume of production. Provided that the enterprise produces 560 thousand pieces in March 2017, and 550 thousand pieces in April. the total cost of one unit of production will be:
- March 2017: 651,547 / 560 = 1163.47 rubles;
- April 2017: 736536/550 = 1339.15 rubles.
Costing
At the end of the reporting period, a count is made in monetary terms costs for the entire output of a certain type of product or one unit of a certain type of product in special forms of documents, it is possible to use opportunities software... In this case, the process of calculating the cost of production is carried out.
For those who decide to start their own business, it will be necessary to study the question of how to calculate the total cost of production. This is important for its implementation. In order to understand this issue, it is necessary to clearly understand what the cost of the product is.
The concept of cost
The cost price is the total and partial sum of the costs of producing and selling a product. The production of a product requires resources:
- material from which the product is directly produced;
- fuel required for the transportation of materials for manufacturing or transportation of finished products to points of sale;
- repair work;
- workers' wages;
- rental of premises, if required.
Each product is individual and requires its own manufacturing resources. And in order to figure out how to calculate the cost of production, you need to take into account each stage separately.
Economic concepts of cost
Full cost
This is the ratio of all costs to total production. This calculation is suitable for mass production. Costs include:
- Employee salaries.
- Contributions to government funds.
- Raw materials used for the manufacture of products.
- Accounting for equipment deterioration and expenses for its repair (depreciation).
- Advertising costs.
- Other expenses.
It is these costs that determine how to calculate the cost of the finished product. Usually used in large, large-scale enterprises.
Marginal cost
This concept includes the cost of a manufactured unit of production. How to calculate the actual cost of finished goods (also called complete)? This can be done using the formula, but for this you need:
- Calculate how many raw materials and materials are spent on the manufacture of one copy of the product.
- Calculate how much fuel and lubricants and electricity goes to one unit of production.
- Take into account the costs of semi-finished products purchased in other industries, if any.
- Calculate how much an employee will receive by making given view goods (including all social payments).
- Know the cost of repairing and depreciating equipment.
- Consider tool wear.
- Calculate the cost of maintaining a production facility.
- Other costs.
After analyzing the data above, you can imagine how much raw materials are used to make a unit of production. And if we add to all this: transportation; contributions to government funds; payment for employees' leave; taxes; expenses incurred by the organization due to unforeseen circumstances - all this will give you a complete picture of how to calculate the actual cost of production.
Cost types
In addition to the basic types of costs, there are also types that are specific to a particular production.
- Aggregate cost... The cost of the cost of manufacturing a product on a specific machine is estimated, be it technical machine or woven.
- Prime cost. In addition to assessing the costs of manufacturing products in the workshop, the costs of maintaining and maintaining the territory itself are also taken into account: heating, security, alarm, fire protection, management structure.
- General production costs. Consist of the cost of depreciation and repair of equipment, advanced training of workers, taxes.
- Full cost price. In addition to other expenses, it includes the costs of packaging, loading and unloading of products, transportation services.
Why do you need to calculate the cost of production?
When opening a business, not everyone is in a hurry to immediately calculate the cost of production, thereby making a huge mistake. This mistake can lead you at least to losses, and at most to complete bankruptcy.
What the cost analysis will give you:
- Shows the profitability of all your products... After all, it depends on it how efficiently raw materials and other, monetary and human, resources will be used.
- Forms retail and wholesale prices... The correct effective pricing policy will allow you to make production competitive.
- It will make it clear how effectively the production process at the enterprise works. The lower the cost of production compared to the average statistics in this industry, the more efficiently the company will work. Accordingly, the higher the costs, the lower the profitability and efficiency of the enterprise.
- It will form an indicator of reduction of fixed and variable costs.
Your profit depends on the calculation of the cost price. A cycle system operates here: the lower the cost, the greater the profit, and the higher the cost, the lower the profit. Therefore, each manufacturer seeks to reduce production costs in the pursuit of profit. In this case, the quality of the product may also suffer. In order to run your business correctly, it is imperative to calculate the cost of manufactured products, this is one of the main elements of enterprise management.
How to calculate the cost of production using the example of a furniture workshop
As an example will be taken furniture company LLC "Divan". It is required to calculate the cost of the manufactured product for December. A total of 12 were released corner sofas, 10 sofa-books, 24 armchairs.
| Number | Cost item | Corner sofa | Sofa - book | Armchair |
| 1 | Raw materials used | 192,000 rubles. | RUB 60,000 | RUB 72,000 |
| 2 | Energy | RUB 21,000 | RUB 16,000 | RUB 18,000 |
| 3 | Workers' wages | RUB 36,000 | RUB 15,000 | RUB 16 800 |
| 4 | Fund contributions | 4320 RUB | RUB 1,500 | 1680 RUB |
| 5 | Equipment operation | RUB 10,000 | RUB 7,000 | RUB 5,000 |
| 6 | Other costs | 2000 RUB | 2000 RUB | 2000 RUB |
| Total: | RUB 265 320 | RUB 101,500 | RUB 115,480 | |
Total:
- The cost of one corner sofa is: 265 320: 12 = 22 110 rubles.
- The cost of one sofa-book is: 101,500: 10 = 10,150 rubles.
- The cost of one chair is: 115 480: 24 = 4 812 rubles.
How to calculate cost of goods sold
Let's take as an example a firm that makes sofas that we are already familiar with. In December, ten corner sofas, seven book sofas and twenty armchairs were sold.
Let's use the data above and calculate:
- Ten corner sofas cost us 221,100 rubles (22,110 x 10).
- Seven sofa-books - 71,050 rubles (10,150 x 7).
- Twenty seats - 96,240 rubles (4812 x 20).
The total result was: 388 390 rubles.
Features of the cost
In the course of its work, each organization seeks to minimize its production costs. Therefore, the question of how to calculate the cost of production will depend on a number of factors. Directly all costs are included in the cost of production, up to heating the premises in winter period(v summer period absent). All this allows us to judge that the main management mechanism is the analysis and accounting of all aspects of the organization's economic activity, which will make it possible to judge correct work firms. At the same time, the specific cost estimate will depend on the inventory, technological features enterprises and from the managers themselves, who own this or that information about the production. 
Each company has its own costing method. So, for example, the production of confectionery products according to the costing system will differ significantly from the method of calculating the cost price for furniture factory... In the first case, electricity and shelf life will be of paramount importance (it must be given Special attention), and in the second case in the first place will be large financial resources spent on raw materials and transportation of a large-sized product. And, accordingly, for an enterprise that produces sweet products, there is only one calculation method, and for upholstered furniture- another.
