What is Cost of Goods Sold (COGS)? How to calculate?

Cost of Goods Sold in English, abbreviated as COGS, is the direct cost incurred by an enterprise in the process of providing products and services, including raw materials, direct labor and manufacturing expenses. These costs typically include: Raw Material Cost: The cost of purchasing raw materials and components used to produce a product. Direct labor costs: wages and benefits for workers directly involved in the production process. Manufacturing expenses: other expenses directly related to the production process, such as factory water and electricity bills, maintenance and repair costs of production equipment, etc. Cost of sales can be used to calculate gross profit (Gross Profit). The calculation formula is: Gross Profit = Total Revenue – Cost of Sales.