Glossary

With over 200 terms in both English and French, our M&A Dictionary is designed to help you better understand the key words and concepts related to the sale oe purchase of a business in Canada.

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Cost of Goods Sold

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Category: Accounting and Finance

Definition:

Cost of Goods Sold (COGS) measures the “direct cost” incurred in the production of any goods or services. It includes material cost, direct labor cost, and direct factory overheads, and is directly proportional to revenue. Cost of goods sold consists of all the costs associated with producing the goods or providing the services offered by the company. For goods, these costs may include the variable costs involved in manufacturing products, such as raw materials and labor. COGS does not include general selling expenses, such as management salaries and advertising expenses. The objective in determining COGS is to calculate the “true cost” of merchandise sold during a specific period. It helps management and investors monitor the performance of the business.