Bill of Materials

The list and total cost of parts, components and assembly needed to produce one unit of a physical product.

Example

A device selling for 500 with a bill of materials of 300 has a 40% margin before other costs.

Important

Warranties, returns and shipping add further costs per unit beyond the bill of materials.

Related terms

• Gross margin — Gross profit - revenue less the cost of goods sold - expressed as a percentage of revenue. It asks whether the thing being sold makes money.
• Capital Intensity — The amount of capital a business needs to invest, in equipment, inventory or projects, to generate revenue and grow.

Lessons that explain it

• Climate and hardware companies need capital before revenue and margins before scale — Physical-product businesses face manufacturing risk, inventory, lower gross margins and large capital needs. Many climate companies also depend on policy and on project finance to deploy their technology. (11 min)

All 578 terms in the Investing glossary