4 ms·

Probably includes R&D and plant setup. I am not an accountant, but under GAAP (most common set of accounting rules), I have heard that a lot of R&D is treated a

• saltcured 2y ago
  Cutting material orders and production plans because of slow sales may be wise, because you don't want logistics issues from overstock of supplies or finished units. But it's all about production and sales forecasting. But, it has essentially nothing to do with past R&D costs or how they are arbitrarily pinned onto units sold. This assignment of R&D to COGS makes for this bizarre reporting and maybe even poor decision making, if people stop remembering why the accounting looks this way. The sunk R&D cost is already there, and adjusting the amortization denominator (number of units sold) on the fly makes for imaginary trends. This accounting fiction makes for a COGS that gets worse as you reduce sales. So any rhetoric around "losses per unit" is tainted with this counter-intuition. Your losses are from each missed sale below your original marketing plan, where you predicted you would have enough sales to support the R&D expenditure. You don't recover them by reducing sales. At most, you can reduce further bleeding of operational costs like marketing and production if you truly believe that your sales targets are doomed.