I am in the middle of business class from the SBA. A portion of this class is to analyze our financial health which includes everything from the P&L to the measures we take to improve employee efficiency.
As part of this class, they provided financial sheets for our industry and I am trying to figure out what our COST OF GOODS could possibly be. As of now, I don't have an answer, only the question. Does anyone know what all is involved with our COGS?
I have attached the sheet for reference.
If you sold a widget it would be all the costs associated with what it took to make the widget and deliver it to the end user.?ÿ It's a combination of the labor costs and overhead costs that go into delivering a map (widget) if you price by fixed fee?ÿor an hour of your time (service) if you bill hourly.?ÿ
COGS reduces your tax burden.?ÿ It gets deducted from income, so better than an expense.?ÿ Things like rebar/pipe, plotter paper/ink, qualify.?ÿ You buy it and sell it to the client. Not much there for most service companies.
Definition from Investopedia: Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs.
Mr. Frymire mentions things typically associated with surveying firms. They are things needed to supply the service, you can't supply the service without them.
COGS for a sandwich shop would include things like: tomatoes; meat; bread; mayo... and would likely be catagorized as "raw materials."
On my P&L?ÿ statement, (Profit and Loss, aka income statement) COGS are: payroll expense; payroll taxes; subcontractor; field supplies.
The payroll expense and payroll taxes only apply to field time or drafting that is associated with actual production of surveying.
Things that are not COGS include: insurance; rent; utilities; etc. These are things you have to pay for just to run the business. You have to pay for these things even if you don't provide your service to anyone.
