Cost of Goods Sold (COGS)

In NetSuite, Cost of Goods Sold (COGS) represents the direct costs associated with producing or purchasing the goods that a company sells.

COGS includes all expenses directly tied to the production or procurement of goods sold by the business. This typically includes:

• Purchase Price: The cost to buy inventory items.
• Direct Labor: Wages for employees directly involved in production.
• Direct Materials: Raw materials used in the production of goods.
• Landed Costs: Additional costs such as shipping, handling, customs duties, and taxes.

How COGS is Managed in NetSuite

1. Inventory Valuation Methods

• FIFO (First In, First Out): Costs are assigned based on the order in which inventory was received. The oldest inventory costs are used first when calculating COGS.
• LIFO (Last In, First Out): Costs are assigned based on the most recent inventory purchases. The newest inventory costs are used first.
• Weighted Average: Costs are averaged over the total quantity of inventory, and this average cost is used for COGS calculations.
• Specific Identification: Costs are tracked and assigned to specific items, used for high-value or unique items.

1. Setup:

• Go to: Setup > Accounting > Accounting Preferences.
• Navigate to: Items/Transactions tab to select the desired valuation method.