![]() In short, COGS is an important metric for businesses of all sizes. COGS is used to calculate income taxes. Businesses are able to deduct their COGS from their revenue when calculating their taxable income.COGS helps businesses to set prices. Businesses need to set their prices high enough to cover their COGS and other expenses in order to be profitable.COGS is used to calculate a number of important financial ratios, such as gross profit margin and net profit margin. These ratios can be used to compare a business’s performance to other businesses in the same industry.It helps businesses to track their costs and profitability. By understanding their COGS, businesses can identify areas where they can reduce costs and improve profitability.Manufacturing overhead: The indirect costs associated with production, such as rent, utilities, and insurance.ĬOGS does not include indirect expenses, such as marketing and sales costs.ĬOGS is important for a number of reasons:. ![]()
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