Cost of Goods Sold

These are direct costs that are incurred in the production of income to a business. In a manufacturing business these are usually stock, materials and freight.  In a retail business this direct cost is product purchased from a wholesaler. Alternatively, in a service based industry (let's say a surveyor) this direct cost might be wages.  By "direct costs" we mean costs that have a very close relationship to sales activity – a movement in sales will see a movement in direct costs.