Why must directed costs be included when calculating e-commerce COGS?
Asked 3 years ago
The first month of my e-commerce business is almost up, so I need to calculate the COGS. I will need to total up my beginning inventory, purchase costs, labor costs, materials costs, supplies costs, and miscellaneous costs and subtract my ending inventory. I'm a little bit confused about the formula for calculating the COGS, though. Why must directed costs be included?
Scottie Gordon
Wednesday, August 10, 2022
COGS has no connection with indirect goods processing costs. Instead, it is connected to the direct costs a store invests in producing goods. The formula to calculate the COGS is:
COGS = Starting Inventory + Purchases – ending inventory cost
The COGS only cites the directed costs that a company uses to produce goods or provide a service. Therefore, it is also known as direct costs of sales.
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