What Is Included in Cost of Goods Sold? Definition & Examples
The cost of goods sold (COGS) includes expenses directly related to the production of goods or services. It consists of raw materials, labor costs, and factory overhead expenses. Business owners must accurately record COGS to determine profitability and manage finances. Items such as marketing, administrative expenses, and rent are excluded from COGS. Knowing what is included in the cost of goods sold helps companies reduce expenses and maximize profits. A lower COGS indicates better cost management, while a high COGS may affect overall revenue. Learn how tracking COGS can impact financial success.