What is included in cost of inventory?
In addition to the cost of purchasing the inventory itself, costs of inventory may include all costs that make the inventory available for sale, such as duty, freight and, in the case of manufacturers, factory labor and overhead. However, very few growing businesses include anything but the actual cost of purchasing the inventory on their financial statements. The reasons are twofold: First, including the additional costs in inventory would decrease the cost of sales and increase profit. Most small businesses want to minimize taxes and therefore have an inventory value as reasonably low as possible. Second, fully costing the inventory is time-consuming without the right software program. You should note that from a management point of view, it is essential that you also include those costs in your inventory costs–otherwise, you run the risk of undercharging for your products. Ian Benoliel is the CEO of NumberCruncher.com Inc., a developer of budgeting, manufacturing and management sof
