Allocating Expense of single purchase to Infinite Goods

[Constansere]

My question pertains to allocating an expense directly related to the procurement of a good while the purchase is a single purchase that leads to an infinite number of products.
Specifically the purchase of a packet of data which will be used in the development of a software product where the software product may be reproduced any number of times. Another example is the expense of salary for software developers, where once developed the software may be reproduced infinitely. I am trying to allocate it as a COG but as there is an unlimited inventory with a single cost (say $1000) I don’t know how to attribute it to the COG of inventory. Thanks.

 

[ArcSine]

"At the limit"---mathematically speaking---the allocation of a finite cost to an infinite number of units would be zero.

But back on Planet RealLife, it's probably the case there is indeed some reasonable upper bound on the number of units to be replicated. Maybe you could come up with a reasonable guess "X" as to how many units are most likely to be produced, and distribute the cost to those first X units?

If you guess low (and end up producing more than your estimate), all the excess units (beyond your guess) will just have no cost allocation, but that's no big deal since the per-unit allocated cost is likely to be very small. Hence, no material diff in the cost of a unit "with" an allocation, vs. "without".

There may be a tax incentive to guess conservatively, in order to charge off the cost to COGS as quickly as possible. Check with your tax advisor to see how low of an estimation of total expected production would be acceptable to the tax authorities of your particular jurisdiction.