Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.

Cost of goods sold is also referred to as "cost of sales."

  • Cost of goods sold (COGS) includes all of the costs and expenses directly related to the production of goods.

  • COGS excludes indirect costs such as overhead and sales & marketing.

  • COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin. Higher COGS results in lower margins.

  • The value of COGS will change depending on the accounting standards used in the calculation.

DOWNLOAD: Cost of Goods Sold