Cost Of Goods Sold (COGS)

The cost of goods sold, or COGS, refers to the direct costs that go into producing the goods or products that a company sells. Direct costs include the financial resources required to manufacture the product, such as raw materials and labor. The COGS definition is simply the sum of the costs incurred in the production of a good. Indirect costs such as distribution are not included in the cost of goods sold.

To calculate COGS, add the cost of initial inventory to the additional material and labor costs. The value of the inventory that needs to be sold is subtracted from that.

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