Profitability & Margins
COGS (Cost of Goods Sold)
The direct costs of producing or purchasing the products you sell, including materials, manufacturing, and freight.
Formula
COGS = Beginning Inventory + Purchases - Ending InventoryWhat is COGS?
Cost of Goods Sold (COGS) represents the direct costs attributable to the products you sell. For e-commerce, this typically includes the purchase price from suppliers, manufacturing costs, inbound freight, and duties.
What's Included in COGS?
- Purchase price or manufacturing cost
- Inbound shipping and freight
- Import duties and tariffs
- Direct labor (if manufacturing)
- Packaging materials
What's NOT Included
- Marketing and advertising
- Outbound shipping to customers
- Payment processing fees
- Rent, utilities, and overhead
- Salaries (non-manufacturing)
Example
You buy a product from your supplier for $12, pay $2 in shipping and $1 in duties. COGS per unit = $15.
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