Cost of Goods Sold (COGS) is a measure of the direct costs associated with producing the goods or services that a company sells. This measure includes the costs of materials, labor, and other expenses that are directly tied to the production of the goods or services. COGS does not include indirect expenses, such as overhead or administrative costs, that are not directly tied to the production of the goods or services.
For example, a company that manufactures and sells smartphones might have COGS that include the costs of the materials and components used to make the phones, the cost of the labor to assemble the phones, and the cost of any other expenses directly tied to the production of the phones. COGS does not include the cost of advertising, marketing, or selling the phones, as these are considered indirect expenses.
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