Cost of Goods Sold (COGS) represents the direct costs associated with the production of goods sold by a company.
This includes the cost of the materials used in creating the goods along with the direct labor costs used to produce them.
But it can be different for various types of businesses... Let's see some!
Manufacturing Company🏭 🛠️ 🔩
- Raw materials
- Direct labor costs
- Manufacturing overhead (machinery, utilities, etc.)
Retail Business🛍️ 💳 🏬
- Purchase cost of merchandise
- Freight
- Customs duties and taxes for imported goods
Restaurant/Food Service🍽️ 🥗 🍔
- Cost of ingredients (meat, vegetables, etc.)
- Kitchen supplies
- Packaging costs for take-out items
Construction Company🏗️ 🚧 🔨
- Cost of construction materials (lumber, concrete, etc.)
- Direct labor costs (wages for construction workers)
- Equipment rental or depreciation
Software Company (Selling Physical Products)💿 📦 💻
- Cost of producing software CDs/DVDs
- Packaging costs
- Direct labor costs for assembly and packaging
Agricultural Business🌾 🌱 🚜
- Seed costs
- Fertilizers and pesticides
- Direct labor costs for planting and harvesting
Apparel and Clothing Business👗 🧵 🧶
- Fabric costs
- Production labor
- Manufacturing overhead (if manufactured in-house)
Auto Dealership🚗 🚘 💰
- Purchase cost of vehicles from manufacturers or distributors
- Transportation costs to the dealership
- Costs related to preparing vehicles for sale (detailing, etc.)
Service-Based Business🧹 💼 🛠️
Service-based businesses often have a lower COGS as they do not sell physical products. However, if they have any direct costs associated with delivering the service, it could be considered as part of COGS.
- Cost of materials used to deliver the service (cleaning supplies for a cleaning service, for example)
- Direct labor costs (wages paid to employees delivering the service)
E-commerce Business🛒 🌐 📦
- Cost of goods purchased from suppliers
- Packaging materials
- Shipping and handling costs
Pharmaceutical Company💊 🧪 🔬
- Raw materials for drug manufacturing
- Production labor costs
- Research and development costs (not typically included in COGS but are a significant cost for pharmaceutical companies)
Oil and Gas Company⛽ 🛢️ 🏭
- Cost of extracting oil or gas
- Transportation costs
- Depreciation on extraction equipment and infrastructure
Bakery🍞 🥐 🍰
- Cost of ingredients (flour, sugar, etc.)
- Packaging costs
- Direct labor costs for baking and packaging
Airline✈️ 💺 🌐
- Fuel costs
- Aircraft depreciation or leasing costs
- In-flight services and supplies
Brewery🍺 🍻 🛢️
- Cost of ingredients (hops, malt, yeast, etc.)
- Packaging costs (bottles, labels, etc.)
- Direct labor costs for brewing and packaging
Freight and Logistics Company🚚 📦 🌐
- Fuel costs
- Vehicle depreciation or leasing costs
- Packaging and handling materials
Furniture Manufacturer🪑 🛋️ 🛠️
- Cost of raw materials (wood, metal, fabric, etc.)
- Manufacturing labor costs
- Manufacturing overhead costs
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