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Acronyms Dictionary

COGS

Definition

Cost of Goods Sold. The direct costs of producing the goods sold by a company.

Deep Dive

COGS represents the direct expenses incurred in producing the products a company sells. This includes the cost of raw materials and direct labor. COGS is subtracted from revenue to calculate Gross Profit.

Examples & Use Cases

  • 1A baker including the cost of flour, sugar, and electricity as COGS
  • 2A software company counting server hosting and third-party API fees as COGS
  • 3Calculating gross margin by subtracting a product's COGS from its retail price

Related Terms

Gross ProfitEBITDAP&L

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