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How to account for inventory and COGS
How to calculate your cost per unit
How to calculate your cost per unit
Rayla Rappaport avatar
Written by Rayla Rappaport
Updated over a week ago

To calculate the cost per unit of your products or SKUs, include all costs necessary to get the unit ready for sale, including all purchase costs mentioned below, allocated per unit:

  1. Net purchase price of the unit usually includes -

    • Direct purchases of ready-for-sale items (also known as finished goods or finished products)

    • Raw materials, if relevant

  2. Estimated indirect vendor costs, usually include -

    • Shipping/ freight costs to ship the stock to your warehouse

    • Other indirect vendor costs (such as sales tax and vendor fees)

  3. Purchase price of packaging and labeling supplies per unit (since these items are usually purchased in bulk but used at the rate of actual sales)

  4. Estimated manufacturing / assembly costs, usually include-

    • Direct and indirect labor

    • Contract manufacturers

    • Manufacturing overhead

    • This is less relevant if you’re a reseller and don’t manufacture your own products

Estimated cost per unit should NOT include:

  • Shipping costs to customers (e.g. USPS, UPS)

  • Warehouse fees

  • Payments processing fees

  • Marketing costs

Let's take a quick example - You are assembling 100 units of Product A and incur $2,000 in raw materials and $500 in packaging costs. The cost per unit of Product A would be $25 (total costs of raw materials and packaging costs, divided by the quantity).

If you have your cost per unit and want to know where to input it in the Finaloop COGS tracker, check out this article.

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