Cost of Goods Sold (COGS)

Direct costs of producing goods that were sold — materials, labour, production costs

COGS (Cost of Goods Sold) are the direct costs associated with producing or purchasing goods that were sold in a given period. Includes materials, direct labour and production costs — but not selling or administrative expenses.

Gross margin = (Revenue − COGS) ÷ Revenue × 100%

Revenue: $100,000 · COGS: $60,000
Gross margin = (100,000 − 60,000) ÷ 100,000 = 40%

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