Intermediate Inputs vs. COGS

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Christian Glupker

• October 06, 2022 13:51

I need confirmation I'm inputting this correctlying into IIA-Detail.

My client provided me with 10-years projections. 

The COGS figure includes materials, operating costs, and wages.  Per our last discussion, I don't want to use COGS as  the intermediate input because it ignores the impact of inventory.

Thus to arrive a true intermediate input value, I did the following:

Change in inventory + COGS - Wages = intermediate inputs

I included the wages with the other wages in employee compensation.

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• Official comment

  

  Michael Nealy

  • October 06, 2022 18:13
  • Edited

  Hello again Christian!

  It would not be appropriate for the change in inventory to be accounted for in the Intermediate Input value. Instead, this should be accounted for in the yearly revenue/sales value, as Output should be net of inventory changes. So if you have total sales as $10M, but you know that $4M of that came from inventory that was produced in a prior year - then $6M would be your inputted Output value for the IIA Event. On the other hand, if you have sales as $10M but you know that they added $4M in inventory that was not sold, you would model $14M of Output.  

   

  Best,

  Michael Nealy

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