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How to calculate cost of sales per unit?

I would like to calculate how much does it cost to me selling a product. Independent from what the product is, what would be the formula of this cost. It should include the costs of the process, headcount, marketing plan, product itself, etc. I tried to search it in google but found nothing so far. I want to say that with the resources I have today seliing my product costs me X, if I implemente those improvements it will cost me much less.


7 Replies

Rodrigo Vaca
3
0
Rodrigo Vaca Entrepreneur • Advisor
Product & Marketing
Ebru -

I think you're mixing multiple concepts in here: "t should include the costs of the process, headcount, marketing plan, product itself, etc".

In general accounting terms, you have:
COGS (Cost of Goods Sold) - this is how much it takes you to manufacture the items you're selling

SG&A (Selling General & Admin) - this would include marketing, advertising, etc.

R&D - mostly cost of the headcount (and materials) to develop the product.

In general terms (particularly in high tech/software) "selling my product costs me X" is typically meant to describe Cost Per Acquisition.

Cost Per Acquisition is calculated by taking the total amount of money you spend on a given period (month / year) and then seeing how many customers you've acquired over that period. Say you've spent $100, and acquired 20 customers, then your CPA os $100/20 = $5.

This is of course an over-simplification. Also, keep in mind that while I actually enjoyed my accounting class at school, I'm far from an accountant to give you exact terms and rules for SG& and R&D calculations.

This is a good write-up about CPA: http://www.forentrepreneurs.com/startup-killer/

Hope this helps,

Rodrigo

Michael Goodman
1
0
Michael Goodman Entrepreneur
Controlling the Chaos of Sales for Owners, Executives and Sales Professionals.
Customer Acquisition Cost or Cost Per Acquisition or the search terms you want on Google. Here is a link to an article that may help.https://www.ometria.com/blog/how-to-calculate-cost-of-customer-acquisition-coca-in-ecommerce

It is relative to e-commerce but applies to vehicles as well.
Gustavo Denneberg Guimarães (Guima)
0
0
CCO/CMO Keepmedia
Have you defined a profit margin yet? Rodrigo gave a good overview of how production, marketing and R&D costs should look like, but you need to define your profit margin as well. When you say you need to reduce product costs, a good marketing campaign, could reduce your CPA costs, and ultimately factor in your attempt to reduce production costs, that include Marketing expenses.
Bernie Sapienza
0
0
Bernie Sapienza Entrepreneur
VP Retail Business Development at iBiquity Digital
With only four answers, it looks like you have a good foundation as to how to do this. It appears that what you're selling is Mercedes Benz in Brazil (based on your title). Therefore, I assume that the cars are landing on your shores with a predetermined COGS (cost of goods). That calculation is simple - as Rodrigo pointed out. If you would like to know the cost of sales in totality, Rodrigo also gave you the SG&A explanation. I'm no accountant, but I have been responsible for a number of P&L's in my time and in most cases, the top line states "revenue" and usually, right after that, you see COGS, then followed by "cost of sales". It has been my experience that certain companies choose to load that line up with all kinds of stuff (including marketing) and some companies look at that line as commissions and other direct costs. I think the answer to your question the SG&A example. I think you're trying to understand what the average cost of sales is for Mercedes Benz in Brazil, as an entity. For that, you need to load up on all expenses of the entity.
Curtis Guilbot
0
0
Curtis Guilbot Advisor
Executive Agile Coach
Ebru,

With your lean accounting background, you may be interested in this approach: http://bit.ly/1TByCVd

Most answers to your question will be from a strictly cost-accounting viewpoint, which is only one way to look at operations. And, in my experience, not the best way.

Glynn Bedford
0
0
Glynn Bedford Entrepreneur
1 to 1 Amazon, Ebay Mentoring
For any business you need to know your cost of goods sold and your fixed costs
Your cost of goods sold are anything that are per unit such as purchase costs, shipping per unit, packaging etc.
Fixed costs are a regular cost to your business for example rent, wages, etc. these need to be estimated unless you know exactly how many sales you will make per month, year and divided by your expected sales.
Usually businesses work on a good guessimate as to cost of goods sold as things like multiple orders can reduce any shipping costs and your fixed costs will be divided by your expected sales and added to cost of goods sold figure..
Once you have a realistic idea of your costs then many companies work on a multple of the cost of goods sold or a percentage as the sales price.
Just list all the costs associated with the product and put them into either cost of goods sold or to give you your Gross profit then make the calculation to calculate your expected net profit.
A spreadsheet is great for this as it can help you calculate your ideal or required profit.
A number of free business plan software also have this facility and more.
Peter Jordan
0
0
Peter Jordan Entrepreneur
Revenue hacker for startups - journey to the $1 of revenue
Hello Ebru, If you know the sales process, then you should take every expense needed to make the sale and add those costs up. These costs should have a time perimeter like a day, week or month. This all depends on the length of the sales process. For example, if you have a total month spend of $10,000 USD for 1 sale that takes 1 month to close, then your cost to acquire that customer is $10,000 USD. If you want to be more efficient, then you have to take a look at each component of cost of the sale and work on efficiency. Hope this helps, Peter
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