Cost of Goods Sold COGS: Definition and How to Calculate It
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs. Typically, COGS https://www.online-accounting.net/ can be used to determine a business’s bottom line or gross profits. During tax time, a high COGS would show increased expenses for a business, resulting in lower income taxes. That may include the cost of raw materials, cost of time and labor, and the cost of running equipment. COGS is not addressed in any detail in generally accepted accounting principles (GAAP), but COGS is defined as only the cost of inventory items sold during a given period.The cost of goods made…