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Hi everyone, I'm new here. My name's Will. I've been trying to figure out the general answer to the following question...
What is the term used for fixed costs that are accrued each time you make a sale? I used to think COGS applied to that but I've been told I'm incorrect. To illustrate...
I'm a hog farmer. Every time I take a hog to the butcher, he charges me X dollars to process the hog. That cost is incurred every time I sell a unit (in my case, the hog) and is irrespective of the general costs of running the hog farm.
On the other hand, I have to feed all the hogs on my farm every day, irrespective of whether or not I take a hog to the butcher or sell a hog.
Like I said, I used to think the first scenario was COGS and the second scenario is expenses, but I've been told they're both COGS. So I'm looking for a way to distinguish them when I do my profit analysis.
The distinction is important because the first scenario tells me revenue per unit; I can then use the revenue per unit to figure out how many units I have to sell to pay for the expenses like feed in the second scenario.
Thanks in advance,
Will
What is the term used for fixed costs that are accrued each time you make a sale? I used to think COGS applied to that but I've been told I'm incorrect. To illustrate...
I'm a hog farmer. Every time I take a hog to the butcher, he charges me X dollars to process the hog. That cost is incurred every time I sell a unit (in my case, the hog) and is irrespective of the general costs of running the hog farm.
On the other hand, I have to feed all the hogs on my farm every day, irrespective of whether or not I take a hog to the butcher or sell a hog.
Like I said, I used to think the first scenario was COGS and the second scenario is expenses, but I've been told they're both COGS. So I'm looking for a way to distinguish them when I do my profit analysis.
The distinction is important because the first scenario tells me revenue per unit; I can then use the revenue per unit to figure out how many units I have to sell to pay for the expenses like feed in the second scenario.
Thanks in advance,
Will