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Cost Accounting for Product Packaging?

How do you account for product packaging at your company? (not shipping packaging, but direct product packaging for the plastic used in cereal boxes and the cereal box, labels etc as an example.

The plastic wrap around the product and carton packaging, labels etc are technically a product cost, but would you account for this as part of COGS overhead and then allocate to WIP? Or include as inventory items on the balance sheet and add to the BOMs for depletion? Or another way? Btw, we use standard costing.

Answers

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

It sounds like the material is an integral part of the finished good, so it should be a line item on the manufacturing BOM, which means it should be costed in as material. It's not overhead by its very nature. But you could treat it as a consumable material item if it is relatively minor, not as a pickable inventory item. Esp. if you place bulk plastic wrap at the workstation.
And it should fit with standard costing.

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