3/21/2024 0 Comments Cogs accounting formula![]() ![]() “People understand that raw materials and labour are direct costs that should be included in COGS accounting, but businesses often overlook things like their own time taken to get a product out. It’s important for companies to use the COGS formula to understand what costs are associated with selling a product or service because this helps you to calculate overall profits and can be used to support strategic business decisions. ![]() In this article we’ll explain what the cost of goods sold formula (COGS) is, how, like Dickinson, to use it to keep a close eye on your costs, and why this information is important to SMEs. “We sit down with our accountants every month to track any movement in our costs.” “We’re committed to using only the highest quality British fabrics and we pay a premium for those, but it means we need to track overall costs very carefully, because we can’t afford to reduce the quality of materials,” explains owner and director Alexander Dickinson. It can include raw materials and manufacturing, but also marketing, labour and distribution costs. This refers to the total cost in getting a product or service to customers. When spending this amount on materials it’s critical that Henry Herbert always tracks the Cost of Goods Sold, or COGS. These materials are then crafted into suits and other tailored clothing that can sell for over £5,000. Bespoke tailoring business Henry Herbert spends thousands of pounds each month buying top quality worsted wool from mills in the North of England, along with hand-made buttons and natural lining fabrics. ![]()
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