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Customer Owned Tool Built with Spare Parts. COGS = $0??

We built a customer owned tool with spare parts that we have in our spare parts inventory. We expensed the cost of building this tool and did not record this in COGS. I am challenging whether this is the appropriate treatment. I believe that the COGS should record the cost of the spares used to build this tool. What are your thoughts?

Answers

Victor Shah
Title: Account Manager
Company: FlowRocket, LLC
(Account Manager, FlowRocket, LLC) |

If the spare used out of the existing inventory, yes COGS should be booked a equivalent to the value of the spares used.

As a result of use of these spare parts, the inventory at the period end will be reduced and that is a COGS.

Let me know if this helps

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