And COGS is an expense line item in your company’s income statement, otherwise known as a profit and loss statement, or P&L. The good news is that COGS are small business expenses-which means they don’t count toward your gross revenue. Sure enough, when reporting taxes, Uncle Sam (or your localized government equivalent) wants to know how much a business made so it can tax said business accordingly. The biggest factor is the Internal Revenue Services (IRS). As a retailer, you need to keep a close eye on cash flow or you won’t last very long.īut there are many other factors to keep track of COGS as well as other line items. The higher your COGS, the lower your margins. As a result, these are all expenses that contribute to the end cost of the product.Įxpenses you need to keep track of to ensure you are making not only a healthy gross profit but that you can accurately price products and keep healthy margins.Įmail address Start free trial Importance of COGSĬOGS is subtracted from sales to calculate gross margin and gross profit. Not to mention the overhead: the labor, rent, equipment, electricity to run the operations, and employees to sell said products in your store, as well as sales, marketing, finance, and all the other departments. The cost of shipping said parts to your warehouse. COGS excludes indirect costs, such as distribution and marketing costs.Ī product requires materials and parts, but it also requires a number of other things: Also referred to as “cost of sales,” or "COGS report," COGS includes the cost of materials and labor directly related to the production and manufacturing of retail products. What is cost of goods sold (COGS report)?Ĭost of goods sold (COGS) is the direct cost of producing products sold by your business. Information needed for cost of goods sold calculation.
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