Translation: Cost of Goods Sold (COGS) = Cost of goods sold.

Simplified definition: It is the "direct costs" of making the product. If you were selling "coffee", this term would only include the cost of beans, milk, and cups.

What does it mean to you?

  • Manufacturing efficiency: If this cost is too high compared to the selling price, it means the company is failing to manage its raw materials.

Common question: Does it include the salaries of management employees or the rent of the main office?

  • Answer: Absolutely not, it only concerns things and labor that "touched" the product and made it.