What is COGS?

Cost Of Goods Sold (COGS) is the accumulated total of all costs used in the production of a given product or service, which has been sold. The Cost Of Goods Sold can be attributed to expenses that are associated directly with the production process; for example, cost of materials and direct labor costs. It excludes indirect expenses such as distribution costs and sales force costs, as this allows COGS to be used to calculate a company's gross margin by deducting the COGS' total from revenue.