What is meant by Calculation of cost prices?
The term "calculation of cost of goods sold" refers to the process of determining all costs incurred by a company in producing a product or providing a service. This includes direct costs such as materials and wages, as well as indirect costs like overhead. The COGS calculation helps determine the minimum price a company must charge to cover its production costs.
Typical software functions in the area of "calculation of cost of goods sold":
- Material Cost Calculation: Calculation of material costs based on purchase prices, consumption, and inventory.
- Wage Calculation: Calculation of direct labor costs for producing a product or providing a service.
- Overhead Allocation: Allocation of indirect costs such as administration, energy, or rent to individual products or services.
- Fixed and Variable Cost Calculation: Breakdown of production costs into fixed and variable components for better cost analysis.
- Margin Calculation: Calculation of profit margins based on COGS and the selling price.
- Cost Forecasting: Generating forecasts for future cost developments based on historical data and market trends.
- Reporting: Detailed reports on COGS calculation to support pricing decisions and budget planning.