# Cost of Goods Sold

*Accounting & Reporting — Finicade finance glossary*

Cost of goods sold is the direct cost of producing what you actually sold in the period — materials, direct labour, manufacturing overhead. It excludes selling and administrative costs, which sit below gross profit. What a company chooses to put in COGS versus operating expenses moves its gross margin without changing profit at all, which is why gross margins are only comparable within an industry.

**Formula:** `COGS = Opening inventory + Purchases − Closing inventory`

**Also known as:** COGS, cost of sales, cost of revenue

**Related terms:** [Gross Margin](https://finicade.com/glossary/gross-margin), [Inventory](https://finicade.com/glossary/inventory), [LIFO vs FIFO](https://finicade.com/glossary/lifo-vs-fifo), [Revenue](https://finicade.com/glossary/revenue), [Contribution Margin](https://finicade.com/glossary/contribution-margin)

Source: https://finicade.com/glossary/cost-of-goods-sold