What is included in the cost of goods sold?

What is included in the cost of goods sold?

What Is Included in Cost of Goods Sold? COGS includes all direct costs incurred to create the products a company offers. Most of these are the variable costs of making the product—for example, materials and labor—while others can be fixed costs, such as factory overhead.

What is the difference between COGS and expenses?

The difference between these two lines is that the cost of goods sold includes only the costs associated with the manufacturing of your sold products for the year while your expenses line includes all your other costs of running the business.

What is COGS and how is it calculated?

Cost of goods sold (COGS) is calculated by adding up the various direct costs required to generate a company’s revenues. Importantly, COGS is based only on the costs that are directly utilized in producing that revenue, such as the company’s inventory or labor costs that can be attributed to specific sales.

What is another name for cost of goods sold?

COGS is sometimes referred to as cost of merchandise sold or cost of sales. Some companies that sell a mix of products and services prefer a broader term, cost of revenue, of which COGS is one component.