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Level 1

COGS or Expense?

Help. If a car mechanic purchases a car part at full price with tax and then installs it on a customer's car and the customer reimburses the mechanic for the cost of the part and then pays labor on top... can the mechanic record the purchase of the car part as 'Cost of Goods Sold'? or is it simply a materials expense?

 

Thank you for your help!

 

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Best answer 01-03-2019

Best Answers
Level 12

Re: COGS or Expense?

Not only is the part COGS but so is the cost of payroll directly attributed to this particular service

"The cost of goods sold (COGS), also referred to as the cost of sales or cost of services, is how much it costs to produce your products or services. COGS include direct material and direct labor expenses that go into the production of each good or service that is sold."

 

But your net result will be the same recording the immediately resold part as parts/supplies since it was not in inventory and does not remain in inventory resulting in any year end adjustment of inventory value. It can be cumbersome to allocate  labor across each job but any work your employees do that is not "billable" is not COGS (plowing parking lot, counting inventory, etc)

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4 Comments
Level 12

Re: COGS or Expense?

Not only is the part COGS but so is the cost of payroll directly attributed to this particular service

"The cost of goods sold (COGS), also referred to as the cost of sales or cost of services, is how much it costs to produce your products or services. COGS include direct material and direct labor expenses that go into the production of each good or service that is sold."

 

But your net result will be the same recording the immediately resold part as parts/supplies since it was not in inventory and does not remain in inventory resulting in any year end adjustment of inventory value. It can be cumbersome to allocate  labor across each job but any work your employees do that is not "billable" is not COGS (plowing parking lot, counting inventory, etc)

View solution in original post

Level 1

Re: COGS or Expense?

How do I show the wages that I paid employees via payroll as a COGS? There has to be a report that shows patrol employee wages applied to a specific job. I have a construction company and have carpenters that work on individual client jobs. Currently carpenter wages shows up in operating expense not in COGS event though we tag them to a job in the payroll reporting timesheet.  What report would should those wages as a COGS. I need that report to see if we are on budget for each specific job. 

Level 15

Re: COGS or Expense?

Car part bought specifically for that one customer = COGS. Other COGS = misc belts and plugs and filters you keep on hand and use for services as commonly required for servicing vehicles.

 

Supplies and Materials Expense = bulk rags, clamps, rubbing compounds, cleaning solutions, filters for the Parts Cleaner drum, saw blades, sanding disks, tie wraps.

Level 1

Re: COGS or Expense?

An individual auto repair shop would follow: COG(service) for repair to vehicle, cogs-direct-parts, cogs-direct-labor. Now since the part is purchased and immediately placed on the service vehicle. what account will it pass through? Where does the income from the customer go through?

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