What is cost of goods sold?
Cost of goods sold refers to the direct costs involved in producing or delivering goods and services sold by a business. It includes expenses directly tied to production and delivery.
Why is COGS important?
COGS allows businesses to calculate gross profit accurately. It shows how much it costs to generate revenue and helps assess profitability.
What is included in COGS?
COGS includes costs such as raw materials, production labour, and manufacturing expenses directly linked to goods or services.
How is COGS calculated?
COGS is calculated by taking opening inventory, adding purchases, and subtracting closing inventory for a given period.
How does COGS affect profit?
Higher COGS reduces gross profit, while lower COGS increases profitability.