Reports How do we calculate Cost of Goods in the Income Statement?


The Material Cost and Labor cost values on the Production Analysis, Page 4 of the Courier are for December of that year. The actual material costs are not equal to the Page 4 values because a product coming out of R&D will have a different, generally higher, material cost. Even if  changes were not made to the product, due to the market segment drift, material costs will be higher in January than it is in December.

Inventoried products also affect costs. Generally Accepted Accounting Practices say that labor and material costs of a product are recognized at the time of the sale (this is called the Matching Principle of Accounting). So inventory that is not sold will not be factored into the Cost of Goods for that Round/Year. When inventory is sold, the Cost of Good  for the product is determined by the Average Cost of Good in inventory at that time- instead of Last In First Out (LIFO) or First In First Out (FIFO).