The direct cost of the products you sold in a period, such as buying or making them. It does not include rent, salaries or advertising.
Formula
COGS = opening stock + purchases − closing stock (for a period)
Example
Meera's clothes cost 30% of their selling price. In a month when her ads bring ₹4,00,000 of sales, the COGS on those sales is ₹1,20,000.
How you'll hear it
“COGS is 30% of price, so every ₹2,000 order carries ₹600 of stock cost.”
Don't confuse it with
- Operating expenses: rent, salaries and marketing, which are not part of COGS.
- Contribution margin: what is left after COGS and other per-order costs.
Related terms
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Sources
- COGS: Formula, Calculation & How to Reduce It, Shopify, 2025