What are direct costs?

Cost of Goods Sold Explained Direct costs (also known as costs of goods sold—COGS) are the costs that can be completely attributed to the production of a specific product or service. These costs include the direct expenses for materials used to create the product, and potentially any labor costs that are exclusively used to create the product.

What are direct costs & cost of goods sold?

Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan. Direct costs or cost of goods sold are expenses attributed to the production of a product or service. Learn why this is vital for growing your business.

What costs are included in the cost of goods sold?

The primary costs that must be included in the calculation of cost of goods sold include raw materials, packaging, overhead, direct labor (and indirect labor if it is production related, i.e. supervisory labor), depreciation of manufacturing and distribution facilities, as well as shipping and handling.