Costs Of Goods Sold (COGS), otherwise known as the “Cost of Sales,” refers to the direct cost sustained by a company while selling its product.  

This amount includes the cost of materials and labor, but excludes indirect expenses (i.e. product distribution and marketing). 

COGS is an important metric as it is subtracted from a company’s revenue. 

Wall Street Prep provides an excellent graphic to show how to calculate the Costs of Goods Sold.