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Level 4

Costs direct to sales...

I think I understand COGS at this point (though I've seen it used multiple ways), but what is the term used for costs that are particular to a unit sold, as opposed to costs that are not?

 

For example, every time I sell a hog, I have to pay to have it butchered. As far as that cost is concerned, it doesn't matter how many hogs I'm feeding on the farm. What is the term for that kind of cost, one that is incurred upon the sale of one of your products? I used to think that's what COGS is, but I've been told multiple times it's not.

 

On the other hand, I have to feed all hogs on the farm every day. That cost is not dependent upon the number of hogs I sell (unless I don't replace the hogs I sell). What is the term for this kind of cost?

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Best answer 03-04-2020

Best Answers
Highlighted
Level 15

Costs direct to sales...

First thing is to download IRS Pub 225, that pub is specifically for farmers and ranchers since y'all have some special rules with the IRS

 

COGS means cost of goods sold, and when you fill out the income tax form it revolves around inventory purchased and sold.

 

I would use a COGS type account and select COS (Cost of Sales) as the detail type.  This COS account is where I would post the butchering cost.

 

Costs like feed, water, vet, etc are just operating costs, create your expense accounts as needed and post those cost to them

View solution in original post

2 Comments
Highlighted
Level 15

Costs direct to sales...

First thing is to download IRS Pub 225, that pub is specifically for farmers and ranchers since y'all have some special rules with the IRS

 

COGS means cost of goods sold, and when you fill out the income tax form it revolves around inventory purchased and sold.

 

I would use a COGS type account and select COS (Cost of Sales) as the detail type.  This COS account is where I would post the butchering cost.

 

Costs like feed, water, vet, etc are just operating costs, create your expense accounts as needed and post those cost to them

View solution in original post

Highlighted
Level 4

Costs direct to sales...

"Costs like feed, water, vet, etc are just operating costs, create your expense accounts as needed and post those cost to them" Perfect. Thanks much!

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