Word of the Day: cost of goods sold (COGS)

Word of the Day Daily updates on the latest technology terms | March 8, 2019 cost of goods sold (COGS) Cost of goods sold (COGS) is the total of the costs directly attributable to producing things that can be sold. COGS includes direct costs, such as material and labor, but does not include indirect costs, such as sales, marketing or distribution. In accounting, COGS is a standard item in the expense section of a company's profit and loss statement (P&L). Costs can only be expensed and shown in the P&L after the goods have been sold and their revenues reported in the P&L. The cost of creating goods or services that are not sold should not be included. COGS = Beginning Inventory + Purchases During the Period - Ending Inventory Once the cost of goods sold has been found, the answer can be used to calculate a business's gross income. This is the amount a business earns from sales before deducting taxes and other expenses. Gross Income = Revenue - COGS   The gross profit can then be used to calculate the net income, which is the amount a business earns after subtracting all expenses. Net Income = Revenue - COGS - Expenses COGS is sometimes referred to as cost of merchandise sold or cost of sales. Some companies that sell a mix of products and services prefer a broader term, cost of revenue, of which COGS is one component. Quote of the Day "Replenishment strategies, lot sizes, safety stock, reorder point planning and replenishment lead time are five factors in ERP that can ensure inventory remains at an optimal level." - Jawad Akhtar Trending Terms profit and loss statement general ledger gross revenue net income revenue recognition Learning Center What are the biggest inventory optimization factors in ERP? Inventory management is a financial tradeoff between the costs of maintaining sufficient inventory and the potential stock-out costs, but there are five factors in ERP that can prevent the fallout of insufficient stock and lead to inventory optimization instead. Top 5 inventory management challenges for manufacturers Read what users, analysts and vendors named as the top five inventory management challenges for manufacturers and get tips on the most effective technologies and best practices. Why craft beer makers are tapping into ERP for craft brewery software Explosive growth can derail your craft beer business without the right craft brewery management software. Learn why ERP can help manage the challenges of success. How is inventory management for e-commerce challenging? Inventory management for e-commerce poses both demand and supply challenges. Here are some ideas on how you can handle them. IoT's surprising impact on revolutionizing inventory management One of the most impactful areas of IoT, says OnProcess Technology's Sarah Hatfield, is in spare parts inventory management, a key aspect of the post-sale supply chain. Quiz Yourself Gray market products are either _________, distributed outside the authorized channels, or both. a. inauthentic b. unauthentic Answer Stay in Touch For feedback about any of our definitions or to suggest a new definition, please contact me at: mrouse@techtarget.com Visit the Word of the Day Archives and catch up on what you've missed! FOLLOW US About This E-Newsletter This e-newsletter is published by the TechTarget network. To unsubscribe from Whatis.com, click here. Please note, this will not affect any other subscriptions you have signed up for. TechTarget, Whatis, 275 Grove Street, Newton, MA 02466. Contact: webmaster@techtarget.com Copyright 2018 TechTarget. All rights reserved.