◈ GLOSSARY · BUSINESS & ENTREPRENEURSHIP
COGS (Cost of Goods Sold).
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
COGS is the direct cost of producing the goods or services you sold — raw materials, direct labor, factory overhead for a manufacturer; hosting, payment processing, and support for a SaaS company. It does NOT include marketing, R&D, or general overhead. Revenue minus COGS equals gross profit.
◈ IN PRACTICE
Example
A coffee shop sells $500,000 in coffee. Beans cost $80,000, milk and syrup $30,000, cups and lids $20,000, barista wages allocated to production $90,000. COGS = $220,000. Gross profit = $280,000.
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