Hello,
I saw a similar question asked but it wasn't answered, so here goes:
I get my goods (hats) manufactured to my designs via contract manufacturing/OEM so everything such as labor and materials is included in the price per item (COGS) except when new molds have to be created for new shapes.
In that case I am charged a fee for the first mold/prototype (size M) and if changes have to be made I am charged again for a 2nd mold and so-on. Upon final approval 3 new molds are made for the other sizes (S, L, XL) These molds are available for current and future production runs of that style.
My question is what would the journal entry be called? (prototypes doesn't quite fit) and is it an expense rather than cogs or asset? Thanks
