COGS

[Former Member]

Hi Friends,

Could anyone tell me

1. why should we create COGS as a Revenue element with Category 11, when it is a Cost.

2. when we run CK11N, the price that gets updated in Material master, is it COGM or COGS.

3. Conceptually is COGM equal to Goods available for sale (Formula of Goods available for sale=Beginning inventory + Net purchases -ending inventory)

Regards

Soujanya.

[Former Member · Accepted solution]

Dear Soujanya,

1) Generally COGS is an expense. No idea why it is created as revenue element.

2) The COGM is updated in Material Master. As Cost estimate run is to plan & determine the cost of goods manufatured in-house.

3) COGM and COGS are two different accounts. Cost of goods manufactured is not equal to cost of goods sold as sale of a product involves additive costs like advertisment and promotion, marketing and distribution charges etc other than manufacturing costs. COGS includes the purchase price of raw material, as well as the expenses of turning it into a product upto selling the same.

Hence COGM need not necessarily be equal to goods available for sale because all the goods manufactured may not be for the sole purpose of sale.

Hope I am clear.

Regards

Harika