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Packing Materials as Cost of Goods Sold?

We are going to be selling bags of firewood. Would you class the expense for burlap bags and shipping boxes as "cost of goods sold" or just materials?

I assume the shipping charges for shipping to customers, ebay & paypal fees, advertising fees, barcode fees, etc., would all be considered CGS expenses as opposed to general overhead.

Thanks

Reply to
Carla F.
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I would put it under COGS

Reply to
HSalim

These are not direct costs to producing your product so they are generally booked to general overhead.

Don't forget that any eBay, Paypal & shipping charges that you pass on to your customer on their invoice is income to your company.

Here is one definition of COGS:

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Cost of goods sold From Wikipedia, the free encyclopedia In accounting, the cost of goods sold (also, cost of sales or cost of revenue) describes the direct expenses incurred in producing a particular good for sale, including the actual cost of materials that comprise the good, and direct labor expense in putting the good in saleable condition. Cost of goods sold does not include indirect expenses such as office expenses, accounting, shipping department, advertising, and other expenses that can not be attributed to a particular item for sale.

Subtracting the cost of goods sold from the amount billed when selling the good (sales revenue) produces the gross profit on the good.

The net profit, what most people understand as the business' income or profit, is determined by subtracting the cost of goods sold and the indirect expenses from the sales revenue.

Reply to
Laura

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