It stands for cost of goods sold; the direct cost of producing products to be sold by a business. COGS costs of the cost of inputs (materials and labor) directly related to the production and manufacturing of the products. This cost reflects the carrying value of goods sold during a particular period, using a valuation formulas, such as specific identification, first-in first-out (FIFO), or average cost.

COGS are costs or expenses that are closely tied to a business’ revenue, margins, and net income (NI).

It is also referred to as cost of sales.