Revenue Equals Cost Of Goods Sold

Cost of goods sold is deducted from revenue to determine a company s gross profit.

Revenue equals cost of goods sold. Cost of goods sold refers to the business expenses directly tied to the production and sale of a company s goods and services. Cost of goods sold cogs is the total value of direct costs related to producing goods sold by a business. On a traditional income statement sales revenue less cost of goods sold equals o a. So for example we may have sold 100 units this year at 4 each and these 100 units that we sold cost us 3 each originally.

Cogs represents expenses directly incurred when a. Apart from material costs cogs also consists of labor costs and direct factory overhead. It is basically the direct materials direct labor and direct expenses involved in making the products. Cost of goods sold is an important figure for investors to consider because it has a direct impact on profits.

Cost of goods sold. Cost of sales and cost of goods sold cogs both measure what a business spends to produce a good or service. Gross profit is the answer to this equation sales cost of goods sold cogs so add up your sales then minus the cost you incurred to create those goods you just sold. Cost of goods sold refers to the costs involved in making the goods or services that are being sold.

Previous question next question transcribed image text from this question. Gross profit in turn is a measure of how efficient a company is at managing its operations. Equals revenue minus cost of goods sold cogs or cost of services cos it is what is left over after a company has paid the direct costs incurred in making the product or delivering the service company name income statement for most recent year dollar amounts in thousands sales revenue 10 400 cost of goods sold expense 6 240 gross profit 4 160 selling general and. And is also known as cost of sales.

So our sales would be. Equals cost of goods sold. Cost of goods sold is commonly abbreviated as c o g s. Gross profit on a traditional income statement sales revenue less cost of goods sold equals view the full answer.

These are easily traceable costs and can be easily identifiable from looking at the products. Cost of goods sold is an expense charged against sales to work out a gross profit see definition below.