Definition The direct costs of making or buying the products a business sold, such as materials and production labour.
Also called COGS, Cost of goods sold
Example €20k of opening stock plus €50k of purchases minus €15k of closing stock gives COGS of €55k.
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Why it matters It directly affects gross profit and pricing decisions.
Where it is used Profit and loss statements and margin analysis.
How to calculate it Opening inventory + purchases − closing inventory
Worked example €20k of opening stock plus €50k of purchases minus €15k of closing stock gives COGS of €55k.
