[Allen Farber]

So I know that you take your total costs (fixed & variable) divided by how many units you produced, but what constitutes as a cost? Initially, I thought it included inventory (money spent on products that haven't been sold) and loan payments (including principal) but then some people said I was wrong. Others said I was right.

[ScottGem]

I think you need to hire a CPA. There is no hard and fast answer to this. A lot depends on the nature of your business.

Figuring a cost per unit is generally for pricing purposes, not accounting or tax filings. So you can include fixed costs not related to production of a specific unit. Salaries paid to office staff, Phone and other utility bills, etc can all go into determining your cost per unit so you can apply a markup.

But for accounting and tax filings, you deal with total costs, not per unit.

[paraclete]

I think you are having us on, if you want to know about accounting methodology read a textbook, your business has suddenly gone from some simple figures that really don't add up to something more complex than a buy/sell operation

[Allen Farber]

I think you are having us on, if you want to know about accounting methodology read a textbook, your business has suddenly gone from some simple figures that really don't add up to something more complex than a buy/sell operation

Basically, all I'm trying to figure out is how to calculate how much a product I make costs. Looking it up, it says take your total costs and divide it by how many products you've made. But the problem is I don't know whether to include inventory or loan payments in the total cost. The reason it doesn't add up is because I'm trying to figure out how to add it up. And I can't tell which of my accounting people are right because one says that I include loan payments and inventory and the other says I don't because it isn't an expense

[ScottGem]

Again, if you are trying to figure out what it costs to make a product so you can determine pricing, then the answer is subjective. There is no right or wrong answer. If you are trying to enter numbers in an accounting ledger, there are hard and fast rules for that.

[paraclete]

If you can't trust the advice you are given hire an independent consultant to both review their work and advise you

[Alty]

Based on your other question, I'm guessing this is another homework question, and like the other question, you pretended this was for an actual business you own, and not for an accounting question in college, and that's why we can't answer you, because you don't have the answers to questions we'd ask of a business owner that's actually in the position you're pretending to be in.

If you were the owner of this business, I'd advise you to hire a reliable accountant. As the accountant for a business scenario such as this, I'd advise you to find a job you can handle, and I'd advise the owner to hire a new accountant.

[paraclete]

Alty this is old and he has already admitted he is a college student with nothing better to do than study accounting because he has failed at everything else

[Allen Farber]

Based on your other question, I'm guessing this is another homework question, and like the other question, you pretended this was for an actual business you own, and not for an accounting question in college, and that's why we can't answer you, because you don't have the answers to questions we'd ask of a business owner that's actually in the position you're pretending to be in.

If you were the owner of this business, I'd advise you to hire a reliable accountant. As the accountant for a business scenario such as this, I'd advise you to find a job you can handle, and I'd advise the owner to hire a new accountant.

I was not pretending to be a corporation owner, I just used this as an example in hopes of figuring out how to calculate cost of goods sold

[paraclete]

Cost of goods sold is a calculation based on the purchases in a period adjusted for movement in inventory

[Allen Farber]

Cost of goods sold is a calculation based on the purchases in a period adjusted for movement in inventory

Still don't get it. What does "adjusted for movement in inventory" mean?

[ScottGem]

What doo YOU think it means?

[paraclete]

Still don't get it. What does "adjusted for movement in inventory" mean?

If you cannot understand English I suggest you change your course of study. This isn't rocket science, but I can calculate your trajectory

[Alty]

Still don't get it. What does "adjusted for movement in inventory" mean?

Oh my. Allen, this simple question, very very simple question, makes me worry about your chosen career even more. If you cannot even decipher this, you will be lost in the world of accounting, which it seems you already are.

This is worrisome.

[smoothy]

I gave up even reading these...

He is NOT cut out for Accounting, no aptitude at all.

I have ZERO accounting schooling, training or experience and most of these appear pretty obvious even to me.

But that's not being mean....everyone has things they are NOT cut out for....I do, he does, everyone does. I feel its like flogging a dead horse to continue trying to be something you have no aptitude for.

DO I wish I had a knack for programming? Yes I do....but I learned over 35 years ago...How programmers think conflicts with my thought processes, and I really am not good at it. But I am good at other things, those are what I have chosen to pursue.

[Allen Farber]

What doo YOU think it means?

Well, I would assume it means moving your inventory from one space or area to another, but then again, these accounting terms never mean what you'd think they mean, so I don't know.

If you cannot understand English I suggest you change your course of study. This isn't rocket science, but I can calculate your trajectory

I do understand English, I just don't know all this fancy-schmancy accounting terminology. Apparently I guess I have to recite the dictionary front and back in order to understand this

I gave up even reading these...

He is NOT cut out for Accounting, no aptitude at all.

I have ZERO accounting schooling, training or experience and most of these appear pretty obvious even to me.

But that's not being mean....everyone has things they are NOT cut out for....I do, he does, everyone does. I feel its like flogging a dead horse to continue trying to be something you have no aptitude for.

DO I wish I had a knack for programming? Yes I do....but I learned over 35 years ago...How programmers think conflicts with my thought processes, and I really am not good at it. But I am good at other things, those are what I have chosen to pursue.

Good, one less person commenting "You're unteachable and shouldn't be an accountant" in the comment section. But of course I'm not cut out for accounting, especially if I'm getting answers like these.

Oh my. Allen, this simple question, very very simple question, makes me worry about your chosen career even more. If you cannot even decipher this, you will be lost in the world of accounting, which it seems you already are.

This is worrisome.

For the love of God, apparently it's not that simple of a question, because 4 users replied and had answers that had nothing to do with the question. I assume it means to move your inventory from location A to location B but I doubt it. And before you call me an idiot or something equally stupid, I did read the definitions of the words "Movement" and "Inventory" and formed that conclusion. So my answer is just based off what the dictionary says those words mean.

[paraclete]

"movement", in the context of inventory is goods that have been sold or otherwise disposed of. I used the word "adjusted" In accounting we do calculations and record transactions .

Just for the exercise, you may have heard the phrase over thinking but I don't think that is your problem.. Inventory is stock in hand, goods in hand, etc, a term defining items held. Sales is a term for items sold and no longer in our possession. Purchases is a term for the cost of items purchased. Perhaps, sold, perhaps remaining in inventory. You wanted to know how to calculate Cost of Sales. A precise methodology can be found in any accounting fundamentals text. You can make your captions as large and as explanatory as you want, we prefer simple captions. Now you can labourously assign every item purchased to every sale if you want to but it is simpler to take an overall approach

[Allen Farber]

"movement", in the context of inventory is goods that have been sold or otherwise disposed of. I used the word "adjusted" In accounting we do calculations and record transactions .

Just for the exercise, you may have heard the phrase over thinking but I don't think that is your problem.. Inventory is stock in hand, goods in hand, etc, a term defining items held. Sales is a term for items sold and no longer in our possession. Purchases is a term for the cost of items purchased. Perhaps, sold, perhaps remaining in inventory. You wanted to know how to calculate Cost of Sales. A precise methodology can be found in any accounting fundamentals text. You can make your captions as large and as explanatory as you want, we prefer simple captions. Now you can labourously assign every item purchased to every sale if you want to but it is simpler to take an overall approach

Still don't really get what you meant by adjust but aside from that, great explanation. Thanks! So just to recap, Inventory is unsold products and that "Movement" means that an item in inventory moves from inventory to sold items, right? Also, one last question. What's a caption? I know it means the title of something in everyday speech, but what is the definition of it in accounting terminology?

[paraclete]

A caption is the name of an account or group of accounts in a report or listing of accounts

[Allen Farber]

A caption is the name of an account or group of accounts in a report or listing of accounts

Thank you