How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask PDtax Your Own Question
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4152
Experience:  35 years tax experience, including four years at a Big 4 firm.
64119565
Type Your Tax Question Here...
PDtax is online now
A new question is answered every 9 seconds

for a jewelry design business can you expense off shipping

Customer Question

for a jewelry design business can you expense off shipping costs for materials used to make inventory, prior to selling a the materials? when we receive materials, those materials could be used to make several individual pieces, so trying to allocate a percentage of the shipping for COGS is virtually impossible.
items in question are listed below:

shipping charges for materials
education or workshops
marketplace fees (monthly or per item listing fees)
paypal fees
Submitted: 3 years ago.
Category: Tax
Expert:  PDtax replied 3 years ago.

PDtax :

Welcome to the site. I will be helping you today.

PDtax :

The shipping out should be allocated to the inventory, and costs recognized when the items are sold.

PDtax :

Instead of allocating the exact dollars, manufacturers making a large number of inventory items create a standard and allocate an amount ot inventory during the year, called standard costing.

PDtax :

At year end, the costs associated with the standard are compared with actual, and the difference reported as gain or loss on the income statement.

PDtax :

A simple example: 5,000 inventory items that cost $1 each need to be sent out for metal plating, which generally costs $.15 each. Set that as the standard, and allocate a standard overhead cost to each item. So, your standard cost is now $1.15 each.

PDtax :

When the bill for plating comes in for $600, you charge that amount to the plating standard cost, and your year end income statement will reflect a $150 gain on plating, but inventory will reflect standard costs for pricing and sales.

PDtax :

Costs such as education or workshops are administrative costs and generally not allocated to inventory unless you are required to follow UNICAP (uniform capitalization).

PDtax :

PayPal fees are a bank service charge not allocated to inventory at all.

PDtax :

Thanks for asking at Just Answer. I'm PDtax.

Expert:  PDtax replied 3 years ago.
Hi Dan,

PDtax from Just Answer. Please advise if you need anything more regarding my work for you. If I have answered your questions, please log in and provide positive feedback to close out your question.