What is Cost of Goods Sold?

What is Cost of Goods Sold?

The Cost of Goods Sold is the cost of producing or purchasing the goods or services that a business sells.

This metric is also known as the Cost of Sales or Cost of Revenue 🀩

πŸ’‘Cost of Goods Sold is calculated by adding up the direct costs associated with the production or purchase of the goods sold during a specific period.

The Cost of Goods Sold includes all the direct costs associated with the production or purchase of the goods or services that a business sells.

βœ… Cost of raw materials, direct labor, packaging, shipping, and handling, as well as any other expenses that are directly related to the production or purchase of the goods.

 

However, the Cost of Goods Sold excludes indirect expenses that are not directly attributable to the production or purchase of the goods or services.

❌ Administrative expenses, sales force costs, rent, utilities, and other general overhead expenses.

By understanding how the Cost of Goods Sold is defined and calculated, businesses can improve their financial performance and achieve long-term success 🌟

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