Operations due diligence – Determining Cost of Goods

[Anonymous]

What are some of the best practices used to determine cost of goods when looking to acquire a manufacturing company. Do you do a bottoms up cost of goods analysis using a costed bill of material and labor hours? What if you have multiple product families and SKUs. I have found that each company accounts for cost of goods differently and the acquiring companies methodology may be different. I have found that some smaller companies “window dress” and move some cost into SG&A thus artificially deflating the real cost of goods.

[Author]

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