Business glossary
Cost of goods sold (COGS)
Direct costs attributable to goods sold during a reporting period.
Example
A retailer sells an item for $150 that cost $90 to acquire. Ignoring other directly attributable costs in this illustration, cost of goods sold is $90 and gross profit is $60.
How it differs from related terms
Cost of goods sold relates to goods sold during the period. Buying inventory does not mean all of it was sold immediately. Separate remaining inventory and operating overhead when evaluating gross profit.
Frequently asked questions
What is an example of cost of goods sold?
A retailer sells an item for $150 that cost $90 to acquire. Ignoring other directly attributable costs in this illustration, cost of goods sold is $90 and gross profit is $60.
How should cost of goods sold be interpreted?
Cost of goods sold relates to goods sold during the period. Buying inventory does not mean all of it was sold immediately. Separate remaining inventory and operating overhead when evaluating gross profit.