Hi klnickols!
That is a great question!
Generally materials that are included in your cost of goods sold are any items that can be specifically identified with a finished product. They are also items that are consumed in the production of your inventory. Your fabric is a good example of this.
Supplies that are not included in your cost of goods sold are items that are used multiple times even if they are used to produce your inventory. Needles are a good example here. I would say your fabric sample cards are also included in this category. Patterns are also a good example of a supply expense. You may purchase a pattern and only use it once, but since you do not sell it with the item it would be a supply rather than a material.
Items you include in cost of goods sold should also be countable. For example you can tell how many yards of fabric you have left. This is countable. This is important because anything you report as cost of goods sold has to be inventoried at the end of the year to come up with your ending inventory. Your ending inventory includes items that were made but not sold and raw materials waiting to be made into items for sale.
You can also look to the price of the supplies. You do not need to track in inventory items that cost your pennies each. While there is not a set amount to make this decision it does not make sense to spend more money and time to track and inventory an item that it costs to buy it.
I hope this helps. If it does not adequately address your
concern, please reply to this post so that I may continue to assist you.
Thank you for using Turbo Tax!
