Cost of goods purchased

Cost of goods purchased
See also


Cost of goods purchased in a very general sense it can be said that it is the purchase price of goods sold during a specified period,including transportation costs [1]. The retail industry introduces a new element to our income and expense statement: cost of good sold. This variable implies that there is a cost to what is being sold beyond the direct client costs that we saw in the service industry. Cost of goods sold has two subsets: cost of goods manufactured and cost of goods purchased [2].

Cost components of purchased goods

Cost of purchased goods includes [3] [4] [5] :

  • Custom duty paid for purchase of imported finished goods - Custom duty paid on the imports purchases is added value. Also other charges related to the delivery like transportation, clearing agent charges are added to the value .
  • Transit insurance of finished goods - Where transit insurance is involved for the shipments of finished goods, the cost is treated as distribution overhead.
  • Carriage paid for finished goods
  • Loading and unloading charges paid for finished goods

Reduced costs of goods purchased

The key to reduced costs of goods purchased is an increase in buyer power. The more a company buys from the same supplier and the longer the relationship with supplier, the better the buyer's bargaining position. Accordingly, the enterprise should consolidate buying as much as possible by reducing the number of suppliers and choosing those which bring it most overall value (price, consistency of supplies, timeliness of delivery etc.). The less consolidated the supply chain, the more savings a company can achieve by improving its strategic sourcing. Greatest savings can often be achieved in the purchase of non-production goods, and on consolidation of the secondary supplier base [6] .

References

Footnotes

  1. Hinkelman E.G., (2008)
  2. Callahan K.R, Stetz G.S, Brooks L.M (2011)
  3. Kamthekar P.D. (2018)
  4. Chatterjee B.D. (2019)
  5. Dutta M. (2004)
  6. Stanford-Smith B., Kidd P.T. (2000)

Author: Aldona Pająk