This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
The Direct Cost of products and/or services provided to customers. COS typically includes raw materials and labor, it can also include individual components such as sales commission and depreciation. This reporting varies on a company-by-company basis.
Cost of Sales is a Variable Cost because the cost reported varies with sales volume.
The terms Cost of Sales, Direct Costs, and Variable Costs are very similar. Check how each term is used in your company.
In Manufacturing, Cost of Sales is often called Cost of Goods Sold or COGS.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.