The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
The classification depends on whether costs are directly attributable to the production of individual units. **Direct, per-unit costs go into COGS; fixed and shared costs go into overheads.** **What belongs in COGS (pure unit economics):** - Filling/bottling fees (outsourced production services directly linked to product output) - Ingredients, glass, caps, and labels (per-unit variable costs) - Direct production labour *if* it can be attributed to conversion of raw materials into finished goods - Per-unit label costs (split tooling/origination fees into overheads, per-label fees into COGS) **What belongs in overheads:** - Production manager salaries and brewer/distilling staff wages (unless they perform *only* direct conversion work with no other business functions) - Storage and warehouse fees - Rent on production plant - Product receiving fees - Shared facility costs like electricity **Key principle:** Members recommend treating COGS as pure unit economics—only costs that scale directly with volume. If staff perform multiple functions or their labour cannot be directly attributed to converting raw goods into finished product, they belong in overheads. Some members argue for including labour in COGS if tracking cost-per-unit is important for their production model, but this requires clear delineation of when direct costs stop being attributable. **Standard reference:** IAS 2 governs the treatment of inventory costs and conversion costs. Members also noted that allocating labour and overhead to per-unit costs can be contentious with accountants—one member wished they'd "stood their ground" on this decision.