All engineers must be familiar with the basics of product costing. All product
cost models are related, but they differ in the details.
List Price, The advertised price of a product.
Average Sales Price, The average price for which the product was sold.
Cost of Goods Sold, COGS is the cost of creating the products that a company
sells it only includes those costs that are directly tied to the production of the
Other Cost of Goods Sold, Sometimes issues arise in manufacturing a product
that results in variances in our BOM cost from the standard. These variances
include things like purchase part variances (i.e. unexpected part cost changes
from the standard), excess and obsolete charges, and expedite fees.
Standard Cost of Goods Sold, The sum of the final cost and freight.
Freight Cost, Cost of shipping the product to a distribution center. This cost is
highly variable because it depends on how you package the product (e.g. one
per box, multiple per box), the distance shipped, and the mode of transportation
(e.g. airplane versus container ship).
Assembly Cost, The cost of assembling the components into a product. This
cost does not include the freight charge associated with shipping the product
from the manufacturing site to a distribution center.
Final Cost, This is a non-standard nomenclature. It is simply the sum of the
BOM cost and assembly cost.
Bill of Materials (BOM) Cost, The cost of the individual components that make
up an assembly. This cost is driven by the product requirements and the implementation
approach used by the design engineers.