Finance and accounting
COGS (cost of goods sold)
The direct cost of making the products that were sold.
Facts checked against sources onWhat does COGS (cost of goods sold) mean?
Cost of goods sold is the cost of producing the goods sold in a period: materials, direct labor and production overhead such as factory running costs. For a service business the equivalent is often called cost of sales. Revenue minus COGS is gross profit.
Where does it come up in case interview prep?
- Procurement and sourcing: where the money goesLesson in Sourcing, trade and supply risk
- The profit and loss statement, line by lineLesson in Business basics for non-business learners
- How the three statements link: one company through all threeLesson in Reading a business through its numbers: the three statements, cash and value
- Working capital in days: receivables, inventory, payables and the cash conversion cycleLesson in Reading a business through its numbers: the three statements, cash and value
- Revenue models, cost structure, unit economics and operationsLesson in Pharma, biotech and medical devices
- Profit and lossLesson
- How retail works and makes moneyLesson in Retail
- How consumer goods companies make moneyLesson in Consumer packaged goods (FMCG)
Related terms
- Gross profit and gross marginRevenue minus the cost of goods sold, as an amount or a percent.
- Opex (operating expenses)Running costs that are not part of COGS.
- Income statement (P&L)Revenue, costs and profit over a period.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Fixed costA cost that stays the same when volume changes, within a normal range.
- Variable costA cost that rises and falls with how much you make.
Learn it in context
See COGS (cost of goods sold) at work in a lesson from Sourcing, trade and supply risk, with checks as you go.
Spotted something wrong or out of date? Report a mistake. We check every report and correct the page.