Cost of goods sold (COGS) refers to the direct costs attributable to the production of the goods that a company sells during a specific period. This includes costs such as raw materials, labor, and overhead directly associated with manufacturing or purchasing the goods. Understanding COGS is crucial for determining a company's gross profit and is influenced by various factors such as inventory cost flow assumptions, the method used for tracking inventory, and how errors in inventory valuation can affect financial statements.
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