What is Cost of Goods Sold (COGS)?

Cost of Goods Sold, or COGS for short, is all about the money a company spends to make the stuff it sells. It’s like the recipe cost for a baker – how much they spend on flour, sugar, and eggs to bake a cake. COGS covers the obvious expenses: the raw materials that go into the product and the wages paid to the workers who make it. But it doesn’t include things like advertising the product or shipping it to customers. Basically, COGS tells you how much it costs to create a product before you start worrying about selling or delivering it. It’s a crucial number for businesses because it helps them figure out how much profit they’re really making on each sale.