Cost of Goods Sold (COGS)

Term Definition
The cost of goods sold (COGS) is an accounting term for the direct expenses involved in producing your business’s products or services which have been sold.

Extended Definition
COGS is calculated with expenses like raw materials and direct labor as well as inventory data. COGS does not include indirect expenses like marketing. The IRS provides information for the correct calculation of COGS for tax purposes. COGS is also important for determining profit levels and determining the selling price for your goods.

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What Is Cost of Goods Sold (COGS)?