Content
Cost of Goods Sold is also known as “cost of sales” or its acronym “COGS.” COGS refers to the cost of goods that are either manufactured or purchased and then sold. COGS counts as a business expense and affects how much profit a company makes on its products.
“Operating expenses” is a catchall term that can be thought of as the opposite of COGS. It deals with the costs of running a business, but not necessarily the costs of producing a product.
What’s included in the cost of goods sold?
This can save you https://intuit-payroll.org/ so you could focus more on your core business functions. Cost of sales is one of the most important performance metrics to get a handle on, particularly if your business is goods-based. In this article we’ll explain what cost of sales is, how it is calculated and some actions you can take to reduce or manage it as an international business.
Raw materials are commodities companies use in the primary production or manufacturing of goods. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. Integrate new products or services to expand your Net Revenue Retention .
Manage tax liability
In the past, it was impossible to compensate on What Is Cost Of Sales? because back-office systems weren’t capable of reporting the profitability of each sale. But today, most businesses understand their cost of goods, which makes it possible to provide salespeople with solid estimates of how much profit their sales are generating. Of all the metrics in the sales and marketing world , the cost of sales is probably the most misunderstood.
What’s in cost of sales?
Cost of sales (also known as cost of revenue) and COGS both track how much it costs to produce a good or service. These costs include direct labor, direct materials such as raw materials, and the overhead that's directly tied to a production facility or manufacturing plant.
