accounting
COGS (Cost of Goods Sold)
COGS is the direct cost of producing the goods or services a business sells, inventory, raw materials, direct labor.
Last updated Reviewed by ICG Funding
Definition
What it means.
COGS appears on the income statement directly below revenue. Revenue minus COGS equals gross profit, and gross profit divided by revenue equals gross margin.
For a product business, COGS includes inventory purchased plus direct freight and labor. For a service business, COGS is usually the direct labor applied to billable work. Rent, marketing, and administrative salaries do not belong in COGS, they are operating expenses.
Now what?
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