what is cogs

COGS stands for Cost of Goods Sold, which is the carrying value of goods sold during a particular period. It is the direct cost incurred in the production of any goods or services, including material cost, direct labor cost, and direct factory overheads. COGS is an important metric on financial statements as it is subtracted from a company’s revenues to determine its gross profit. Gross profit is a profitability measure that evaluates how efficient a company is in managing its labor and supplies in the production process. COGS does not include general selling expenses, such as management salaries and advertising expenses. Knowing the cost of goods sold helps analysts, investors, and managers estimate a company’s bottom line. If COGS increases, net income will decrease. COGS can easily be manipulated by accountants or managers looking to.