#cost-of-goods-sold
Learn how to calculate and track cost of goods sold for inventory valuation
Elect LIFO for tax and every owner and lender statement must use LIFO too — Section 472 lets the IRS terminate the election over one FIFO report.
Under U.S. GAAP, ASC 606 books expected returns as variable consideration: revenue only for what you keep, plus a refund liability and recovery asset.
SaaS gross margin should clear 75–80%, with subscription margins near 90% — but AI inference costs are dragging AI-native products toward 50–60%.
Past about 15 cubic meters, a full container usually beats sharing one — compare all-in quotes, count the LCL days, and capitalize freight into inventory.
Process further only when the added revenue beats the separable cost — joint costs are sunk and never enter the math. Worked example plus four traps.
XYZ sorts SKUs by demand variability, FSN by movement speed, VED by criticality — cross them with ABC to set safety stock, review cycles, and exit plans.
Conversion cost is direct labor plus manufacturing overhead — the cost of turning materials into finished goods, materials excluded.
Mix variance prices the blend change; yield variance prices the waste — and the two always sum to the usage variance.
FRAND commits standard-essential patent owners to license any implementer on fair terms — learn the royalty math and budget per-unit costs before you ship.
Standard costing sets a price and quantity benchmark per unit; materials, labor, and overhead variances split every overrun into causes with owners.
Crown Holdings earned $225M on $3.71B of Q3 2026 sales (+16%), but $405M of the gain was aluminum pass-through and gross profit stayed flat at $724M.
Joint costs split at the split-off point by physical units, sales value, or NRV — but sell-or-process-further decisions must use incremental dollars only.
