COGS
Cost of goods sold — the direct cost of products or ingredients that produced the period’s sales.
Last updated September 5, 2026
COGS typically includes merchandise or food cost, inbound freight, and sometimes merchant-specific packaging. Labor is usually operating expense unless the industry treats production labor as COGS. Gross margin is sales minus COGS; errors in COGS flow straight into SDE. Inventory accounting (FIFO, counts, spoilage) is a frequent diligence finding.