Are sales commission part of the Cost of Goods Sold (COGS)?
No, sales commissions are not typically considered part of the Cost of Goods Sold (COGS). COGS primarily consists of the direct costs attributable to the production of goods sold by a company. This usually includes the cost of the raw materials, direct labor costs involved in producing the goods, and direct factory overheads used in producing the goods.
Sales commissions, on the other hand, are often classified as Selling, General, and Administrative (SG&A) expenses. These costs are not directly tied to making a product or performing a service, but they are necessary for running the business. SG&A expenses are typically listed separately from COGS on an income statement.
However, it’s important to remember that this will depend on specific accounting standards and the nature of a company’s operations. For example, in some cases, if the commission is directly tied to the production or purchase of the goods being sold (such as a purchasing agent’s commission), it could be considered part of the COGS. Always refer to the guidelines provided by the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) and any specific guidance from a certified accountant or financial advisor.
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