What is Cost of Goods Sold (COGS)?

What is Cost of Goods Sold?

COGS is an acronym for “Cost of Goods Sold.” It is a critical expense item on a company’s income statement that represents the direct costs associated with producing or manufacturing the goods or services sold by the company during a specific period.

COGS includes all the costs directly attributable to the production of goods or the provision of services. These costs are incurred during the manufacturing or production process and are directly linked to the creation of the end product. The COGS figure does not include other operating expenses, such as selling, general, and administrative expenses (SG&A).