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    Cost of Goods Sold (COGS) represents the direct costs incurred in the production of goods or services, including raw material costs, direct labor costs, and other production overheads like shipping and factory depreciation. Gross profit is calculated as revenue minus COGS, and gross profit margin is gross profit divided by revenue. A higher gross profit margin indicates greater pricing power and competitive advantage for a company.

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    004 COGS

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    Cost of Goods Sold (COGS) represents the direct costs incurred in the production of goods or services, including raw material costs, direct labor costs, and other production overheads like shipping and factory depreciation. Gross profit is calculated as revenue minus COGS, and gross profit margin is gross profit divided by revenue. A higher gross profit margin indicates greater pricing power and competitive advantage for a company.

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    2 views7 pages

    004 Cogs

    Uploaded by

    caparvez25
    Cost of Goods Sold (COGS) represents the direct costs incurred in the production of goods or services, including raw material costs, direct labor costs, and other production overheads like shipping and factory depreciation. Gross profit is calculated as revenue minus COGS, and gross profit margin is gross profit divided by revenue. A higher gross profit margin indicates greater pricing power and competitive advantage for a company.

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    © All Rights Reserved
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    of 7

    Accounting for Financial Modeling

    COGS
    COGS

    Cost of Goods Sold (COGS) – direct cost incurred in the production of goods or services.

    Shipping,
    Raw Material /
    Direct Labor Factory
    COGS Merchandise
    Cost Overheads,
    Cost
    Depreciation
    Gross Profit

    Gross Profit = Revenue - COGS

    Gross Profit Margin = Gross Profit / Revenue

    Strong gross profit margin indicates a pricing power (hence competitive advantage)
    Gross Profit Margin 20% 19% 18%
    Gross Profit Margin 59% 61% 62%

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