A certified public accountant is one who has earned a license in his or her state that attests to a high degree of skill, training, and experience. In addition to passing an accounting examination, a candidate must have the proper business experience, education, and moral character in order to qualify for the license. The letters CPA are commonly used and generally recognized to be the abbreviation for the title Certified Public Accountant.
For manufactured goods, direct costs also include raw materials, labor, and production expenses. Other costs, such as transportation and advertising, are not included in COGS. To calculate COGS, beginning inventory is added to current period purchases, and ending inventory is then deducted.
Labor costs and materials costs are completely different entities, with two commonalities. Both types of costs can be deducted, and both are used to make a product or provide a service to customers. Both costs are calculated during the budgetary process and are typically considered when determining the amount to charge for the end product. Understanding the difference between labor costs and materials costs is essential to accurate budgeting and making a profit.