![]() ![]() The expense items that make up the Cost of goods sold include: Hence, the COGS only includes the direct cost of producing goods that were purchased by the customers during the year. Moreso, when calculating the COGS, the costs that are incurred on the cars that were not sold during the year will not be included regardless of whether the costs are direct or indirect. This means that the cost of sending the cars to dealers and the cost of labor used to sell the car are not included in the COGS. The costs of the goods that have been produced but not yet sold are deferred as costs of inventory until the inventory is sold or written down in value.įor example, the COGS by an automaker would include the cost of materials for the parts that are used in the making of the car plus the costs of labor used to put the car together. It only entails the costs that are directly tied to the production of the products, which includes the cost of material, labor, and allocated overhead cost with indirect costs like distribution and sales expenses being excluded. The COGS is the cost of manufacturing the goods and products or services that a company sells or renders during a period. We can see that the listed item- the cost of goods sold comes beneath the top line figure “ Sales/Revenue“ Google Income Statement showing the cost of goods sold (COGS) beneath the top line figure “ Sales/Revenue“ It usually appears as a second line item right after the sales revenue on the income statement.įor instance, the image below is an income statement from Google. On this financial statement, the cost of goods sold is usually found directly below ‘Revenue’, ‘Sales’, or ‘Income’ depending on which of these line items the company uses to represent their income. An income statement is also referred to as a profit and loss statement (P&L). The COGS is seen on a company’s income statement (one of the top financial reports in accounting) which reports the company’s income for a certain accounting period (quarter, month or year). Cost of goods sold (COGS) also known as cost of sales is the direct cost of producing the goods that are sold by a company which excludes indirect expenses, such as sales force costs and distribution costs.COGS counts as a business expense and therefore affects how much profit a company makes on its goods.
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