is vital because it directly impacts your profit margin (how much you make on each sale). This helps you understand which products and services are most profitable to sell, and which ones are more costly, so you can make strategic business decisions. It also helps you set the right price for your products and inform production decisions.
What’s included in the cost of goods sold (COGS)
COGS are the direct costs of producing or acquiring the goods sold by a company, including the cost of labor and materials. These costs vary by industry and may include:
Items purchased for resale
Raw materials
Direct labor costs
Shipping and freight
Storage
Factory overhead
It’s important to note that many companies america phone number list purchase their inventory as “ready to sell” from other vendors, which means they don’t break down COGS into these components; COGS is simply the cost of purchasing inventory items. If products are created, however, the above elements should be considered.