I have company that buys product in bulk, re-packages the product to sell 2 or three items together with the seller's brand/packaging, then sales to the retailer. I have a couple of questions...
1. Is the re-packaging of the product a service to the seller?
I believe it is because the distribution center is repackaging using the seller's brand...this would be a service fee to the seller. I may be wrong, but everyone is fighting me saying it's cost of goods sold for the distribution company.
2. If this is not a service fee to the seller, is it part of the distribution center's cost of goods sold?
3. I'm not quite certain of costs of goods sold associated with a distribution center. Please let me know if I'm incorrect or missing something. The COGS for a distribution center are
- Costs associated with Transportation In and between it's own distribution center/warehouses before sale
- Costs associated with unpacking and loading into distribution center
- Rent, utilities associated with storage space of inventory before sale (ex: Distribution Center = 10,000 sq ft, inventory located in 1,000 sq ft. Only utilities and rent allocated to the 1,000 sq ft can be COGS)
- Wages associated with staff doing the above can be allocated to COGS
Anything having to do with the sale of the product does not belong in COGS.
1. Is the re-packaging of the product a service to the seller?
I believe it is because the distribution center is repackaging using the seller's brand...this would be a service fee to the seller. I may be wrong, but everyone is fighting me saying it's cost of goods sold for the distribution company.
2. If this is not a service fee to the seller, is it part of the distribution center's cost of goods sold?
3. I'm not quite certain of costs of goods sold associated with a distribution center. Please let me know if I'm incorrect or missing something. The COGS for a distribution center are
- Costs associated with Transportation In and between it's own distribution center/warehouses before sale
- Costs associated with unpacking and loading into distribution center
- Rent, utilities associated with storage space of inventory before sale (ex: Distribution Center = 10,000 sq ft, inventory located in 1,000 sq ft. Only utilities and rent allocated to the 1,000 sq ft can be COGS)
- Wages associated with staff doing the above can be allocated to COGS
Anything having to do with the sale of the product does not belong in COGS.