COGS

Cost of Goods Sold (COGS) refers to the direct costs attributable to the production or procurement of the goods that a company sells during a specific period. These costs include the expenses for materials, labor, and manufacturing overhead directly associated with the production of goods. For a retail business, COGS includes the cost of purchasing products for resale. COGS is an essential metric for businesses as it directly impacts gross profit and overall profitability. It is calculated using the formula: COGS = Beginning Inventory + Purchases during the period − Ending Inventory By accurately determining COGS, businesses can assess their cost management efficiency, set appropriate pricing strategies, and make informed financial decisions.