Hi everyone. First post on here.

I work in the music industry. Part of my work involves only offering services, not physical products, which makes taxes pretty easy for me since it's just my gross income and then a few gear related things to deduct.

I also build and sell some products and this is where I've gotten confused as to how to determine my income from it. One of the things I make are some high end cables which involves many layers. Each layer sort of contracts and extends as I feed it on so it's not a simple matter of 1m of cable = 1m of part. I'll order 300' of a part and then once I run out of it I order more. There's no way for me to keep track of exactly how much I use for each order.

How should I be determining my income for this? Do I create an estimate for each product I make (say a cable uses x amount of part y for each meter of cable I make and that amount of y costs $$) and then just add up this total hypothetical parts cost to deduct from my gross income? Or do I look at all of the money I spent over the year for parts and subtract that? Where that would get tricky is determining parts I already had and parts that I'm left with at the end of the year. Then there's also the question of R&D cost. If someone orders an item and I try out 10 different parts to find the best one, do I only subtract the cost of 1 part? Or would I subtract the cost of the 10 parts from my income (and hold on to the other 9)?

I've tried researching this and buying a few books about starting a small business but nothing has covered this. I'm not really sure what I should be searching for.