What can be included in COGS calculation?
We have a operations manager who thinks he can purchase anything and "resell" it to the customer. We are in the pump business, we sell pumps and parts.
This manager purchases GIFTS (given to an individual at company ABC) then includes these gifts as COGS for an order to ABC company.

Is this acceptable?

Thanks

That is not ethical at all.

However, a business may include any costs in its COGS when trying to determine what selling price to make a bid for.

If he keeps adding these extra costs, his selling price will be higher than his competitors and ABC Company might go elsewhere.

Now, unless there is some sort of agreement between the 2 companies that they will pay 10% above the COGS, then what he is doing is very very wrong.

The cost of the gift can be included in working out the profitability per individual customer as in Management Accounting. It would still not be part of Product Costing unless it is for a particular Job, Contract or Project. But for Financial Accounting purpose it is purely a part of Selling and Distribution Costs which is a Period Cost. It cannot be included in the Product Cost.