What is cost sales?

Cost of sales (COS), also known as cost of goods sold (COGS), refers to the direct costs attributable to the production of goods sold by a company. This includes expenses such as raw materials, labor, and manufacturing overhead directly tied to the production process. COS is crucial for determining a company's gross profit, as it is subtracted from total revenue to assess profitability. Understanding COS helps businesses manage expenses and pricing strategies effectively.