What is Cost of Goods Sold?

Cost of goods sold is also sometimes phrased as COST OF SALES.


The cost of goods sold is the costs actually incurred in producing the product or service. It is the direct costs of production. It does not include the indirect costs, which may be things like administration and marketing costs. These cannot be directly attributed to producing the product and so are not included.

The cost of goods sold for a production company will include things like raw materials, energy and labour used to produce the product. For a retail company such as Marks and Spencer it will be the total amount they have paid to their suppliers for the products they sell on the shelves.