The Formula For The Cost Of Sales, Here's How To Calculate It To Determine Selling Prices

The formula for the cost of goods sold (Freepik)

YOGYAKARTA - In the business world, determining the selling price of a product cannot be done carelessly. One of the main components that must be taken into account is the cost of goods sold (HPP). So what is the formula for the cost of goods sold that novice businessmen need to understand?

Without knowing HPP, business actors can set prices that are too low so that they lose or are too high so that products are difficult to compete in the market. Therefore, understanding how to calculate HPP is an important step in a healthy and sustainable pricing strategy.

By knowing HPP, business actors can determine the desired profit margin and make more accurate business decisions, such as production efficiency, procurement of raw materials, as well as determination of discounts or promotions. Let's look at the formula for calculating the cost of goods sold so that you can sell products at the right price.

The Price of Basic Sales or HPP is the amount of direct costs incurred to produce goods or services sold by the company for a certain period.

HPP includes several important components such as the cost of purchasing raw materials, direct labor costs, and factory overhead costs.

In the trading business, HPP includes the cost of purchasing merchandise sold. S while in the manufacturing business, HPP also takes into account the production process.

HPP is the main basis in the preparation of profit and loss reports because it affects the amount of gross profit earned. If the HPP is too high and not balanced with the appropriate selling price, then the company could suffer losses.

To understand the overall HPP formula, it is important to know its components, including:

In general, the HPP formula in the trading business is as follows:

HPP = Initial Supplies + Clean Purchase Final Supplies

Information:

To give a clearer picture, here are simple examples of HPP calculations:

A grocery store has the following data:

Step 1: Calculate Clean Purchase Purchase = IDR 25,000,000 IDR 2,000,000 IDR 1,000,000 = IDR 22,000,000

Step 2: Calculate HPHPP = IDR 10,000,000 + IDR 22,000,000 IDR 8,000,000 = IDR 24,000,000

So, the Cost of Sales for this period is IDR 24,000,000. This means that stores must sell all goods at a total price of at least IDR 24,000,000 in order to cover basic costs, not including profits.

Knowing HPP is very important for the following reasons:

That is the formula for the cost of goods sold which is important to be understood by novice businessmen. Calculation of HPP is an important part of decision making, price planning, and business performance evaluation. Also read tips on successful online sales so that there are many orders.

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