The Cost of Goods Sold Expense (COGS) is a vital component of every business. It’s how companies calculate the cost of producing and selling their goods, based on the total expenditure it takes to provide products to customers. In essence, COGS is the total cost associated with selling a product, including the cost of direct materials, labor costs, and overhead. This expense should be tracked regularly in order to provide an accurate picture of the overall profitability of a company.
COGS is also known as a “cost of sales” or “cost of revenue.” It’s important to note that this expense should not be confused with other related costs such as advertising, marketing, or administrative expenses. To get the most out of your business, make sure you understand the difference between these different types of costs.