The Cost of Goods Sold (COGS) Method of setting fees and prices is used when pricing items that consist of multiple components. Marie, the Manager of the Seaside Surf Internet Café, uses this method to price the items on her menu. She needs to know the cost and amount of each ingredient.
To help determine the overall cost of the item, she completes a Cost Card. Once completed, she can set an appropriate price for the final product.
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To set your prices using the COGS Method, complete the following steps:
Determine the components that make up the resale item
Include actual costs for ingredients, production loss, waste, etc.
Total the individual costs
Click the Demo button to see how Marie completed the COGS Method. Please be patient while the Demo is loading.
To remember when to use the COGS Method, use this simple memory aid: Think of two strawberry donut cogs moving a chocolate donut along a conveyor belt towards a cup of coffee. The imagery is to help you remember that the COGS Method is often used to price food and beverage items.
