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Sales promotion expense as part of production cost

20 April 2023

Does sale promotion expense is a part of cost of production if the promotional gift is inbuilt in product
Like free premium of Netflix, YouTube in mobile phone??

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3 Replies

Yasaswi Gomes new (Finance ) (4514 Points)
Replied 20 April 2023

Yes. These free trials could be expenses. They have different strategies. Depends upon the source of income, demand, product line etc which ever brings in the revenues.

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Atharv Sankliya (1354 Points)
Replied 20 April 2023

Does it is recorded in manufacturing account?
means it is considered as part of production cost

Yasaswi Gomes new (Finance ) (4514 Points)
Replied 20 April 2023

MBA marketing is crap! They never addressed this issue quantitatively. So what ever promotion your giving is from the inventory and included into the cost of inventory. Finished goods are measured through different means like batch costing, full cost plus pricing, abc costing, services costing etc. The ending inventory valuation comes from that.

What is service costing? Service costing is the process of identifying all costs associated with building, supporting, and delivering your service. Examples of service cost components include equipment, staff labor, professional fees, software, license fees, and data center charges, to name just a few. I didn't go through what is inventory to them. I guess based on their online capacity, they must be having subscripttions. I'll find out tomorrow. Maybe they don't have inventory at all apart from spares.