How to calculate the cost of goods

The cost of goods or services is the monetary expression of all costs of the enterprise for their production and implementation. It expresses the initial minimum cost of goods or services. Wholesale or retail price cannot be below the cost, as this would mean losses of the enterprise.

The cost of goods or services plays an important role in the economy:

cost cost - the starting point for the formation of the wholesale and retail price;
cost cost - a set of costs of an enterprise for the production and further implementation of the goods;
considering the cost of the enterprise assesses the effectiveness of the production process;
based on the calculations of the cost of production, the regulatory costs and market prices for produced products, it is estimated to reduce fixed and variable costs.

The cost of products is the sum of all costs that are invested by the enterprise for the production and marketing of this product. The cumulative costs of the enterprise consist of permanent and variable costs. Variable costs are entirely dependent on the volume of products. To this view costs include:

wages of working workshops;
fee for materials;
communal services involved in production (electricity used by equipment, water supply and gas supply of the production cycle, etc.);
equipment maintenance costs.

Continuous costs - the costs of an enterprise that do not depend on the volume of products produced and have a fixed monthly volume. There is a relationship between the constant costs and the volume of manufactured products: the greater the amount of products produced, the less constant cost per unit of this product. Continuous costs include:

wages of management personnel;
transport costs;
taxation;
accounts payable;
depreciation deductions;
deductions to the social sector;
communal services not related to production.

To calculate the total cost of manufactured products, it is necessary to sum up all variables and constant costs of the enterprise. When dividing the resulting amount on the amount of production produced, the cost of one unit of products is obtained.

Calculation of cost, if necessary, can be made according to individual processes in production, by different types of products, for individual customer orders.