Cost of Goods Sold

[Oz Lion Heart]

Hi everybody,

I launched my juice business about a month ago and have a question regarding cost of goods sold. I bought a big quantity of bottles and labels (which should last for about 10 months if my projection is about right). Now I want to prepare a monthly income statement and I’m wondering if I should include the cost of bottles and labels (including shipping cost) in addition to the cost of fruits and vegetables to calculate cost of goods sold for the month.

Here’s what I did to calculate cost of goods sold:
Cost of fruits and vegetables for the month (how much I paid for fruits and vegetables for the month)
+ (number of juices sold for the month x cost of one bottle and one label including their shipping cost portion)
= Total cost of goods sold

* Calculation of cost per bottle (the same applies for label cost):
(Total cost for bottles + shipping cost) / number of bottles = cost per bottle

Is that the right way to do it?

Thank you

 

[BIG E]

That's pretty much the way to figure it - but do you also keep track of inventory on hand at the
end of an accounting period? Of both fruits and vegetables AS WELL AS bottles and labels?

 

[Oz Lion Heart]

Thank you Big E for your quick reply.

I only keep track of how many juices I made and how many are left. The juices are good for 4 to 5 days and most of the time they get sold before those 5 days.

Fruits and vegetables also get used in about 3 days and I keep replenishing whatever about to run out.

As for bottles and labels, I ordered 10000 bottles and 5000 labels a few months before launching the business. It is difficult to keep track of how many are left because some bottles were damaged when they arrived and some customers return the bottles and they get sanitized, washed and reused again. However, I can get a rough estimate of how many bottles are left by subtracting the number of juices sold from 10000 and taking into account an estimate of the number damaged and reused bottles (although I think the difference is going to be immaterial and not worth the effort).

It is a small business and sales are not that big (about $2000 in the first month) but being an accountant I‘d like to put my education in use by at least preparing a monthly income statement (I know it won’t be 100% accurate but I’m trying as much as possible given my limited time and resources) to see how the business is performing and hopefully when the business grows I consider preparing a balance sheet and the other financial statements and get them audited by an external auditor.