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Solved Are Labels and Packaging Part of COGS? Form

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Cost of goods sold, commonly referred to as COGS, are the expenses directly associated with producing a product, such as the cost and transportation of raw materials, labor needed to manufacture the goods, and storage fees. COGS does NOT include indirect costs--such as sales, marketing or distribution expenses. From an accounting perspective, COGS is not an asset, nor is it a liability. It is recorded as an expense on an income statement. The cost of goods sold relies on the value of inventory during an accounting period, which can be calculated by taking the beginning Inventory, adding purchases during the period, and then subtracting the ending inventory. As an example, if a business has a beginning inventory of $9,000, makes purchases valued at $5,000, and is left with an ending inventory of $2,000, the COGS is $12,000. Understanding the cost of goods sold is important for many reasons, including: Setting prices that leave healthy profit margins; driving important decision-making, l

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