Financial Glossary
Cost of Goods Sold (COGS)
What is Cost of Goods Sold (COGS)?
Cost of Goods Sold (COGS) includes all direct costs involved in producing goods or delivering services, such as raw materials, labour, and manufacturing expenses.
📏 How to Calculate COGS?
COGS=Beginning Inventory+Purchases−Ending InventoryCOGS = Beginning\ Inventory + Purchases – Ending\ InventoryCOGS=Beginning Inventory+Purchases−Ending Inventory
💡 Why is COGS Important?
- Affects Profitability: Higher COGS reduces gross profit.
- Helps with Pricing Strategies: Determines product pricing to maintain margins.
- Crucial for Financial Reporting: Impacts the income statement.
📌 Related: Direct Costs | Break-even Analysis
Tax & Accounting can be confusing – take the pressure off by hiring a pro.
Get in touch today and schedule a FREE no-obligation consultation with a tax accounting strategist.
