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Cost Of Goods Manufactured vs. Cost Of Goods Sold: What's the Difference?

Edited by Huma Saeed || By Sawaira Riaz || Published on December 6, 2023
Cost of Goods Manufactured (COGM) is the total cost to produce goods, while Cost of Goods Sold (COGS) is the cost of selling those produced goods.

Key Differences

Cost of Goods Manufactured encompasses all costs incurred in producing goods, including materials, labor, and overhead. Cost of Goods Sold refers to the cost of these manufactured goods actually sold to customers, excluding unsold inventory.
Sawaira Riaz
Dec 06, 2023
COGM is calculated before goods are sold and is a measure of production efficiency and cost control. COGS, however, is recognized in accounting when sales occur, impacting revenue and profit figures.
Sawaira Riaz
Dec 06, 2023
COGM is vital for inventory valuation in the balance sheet, reflecting the production costs of completed goods. COGS directly affects the gross profit in the income statement, demonstrating the cost efficiency of sales.
Huma Saeed
Dec 06, 2023
COGM helps in determining the optimal pricing strategy by understanding production costs. COGS is crucial for tax purposes, as it is deductible and reduces taxable income based on goods sold.
Harlon Moss
Dec 06, 2023
COGM includes costs up to the completion of goods, whether they are sold or not. COGS accounts only for costs of goods that have been sold, excluding costs related to unsold inventory.
Harlon Moss
Dec 06, 2023
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Comparison Chart

Definition

Total cost to produce goods.
Cost of selling those produced goods.
Sawaira Riaz
Dec 06, 2023

Calculation Time

Before goods are sold.
When sales occur.
Sawaira Riaz
Dec 06, 2023

Financial Impact

Affects inventory valuation.
Affects gross profit and revenue.
Sawaira Riaz
Dec 06, 2023

Accounting Relevance

Measure of production efficiency.
Reflects cost efficiency of sales.
Janet White
Dec 06, 2023

Costs Included

Materials, labor, overhead for production.
Costs related to goods actually sold.
Aimie Carlson
Dec 06, 2023
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Cost Of Goods Manufactured and Cost Of Goods Sold Definitions

Cost Of Goods Manufactured

COGM is a key figure in determining the cost base of inventory.
The increase in COGM affected the pricing strategy for their products.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Sold

COGS is the cost of inventory sold during a particular period.
The company's COGS was key in calculating their gross profit.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Manufactured

COGM is the total cost incurred in the production of goods.
The company's COGM increased due to higher raw material costs.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Sold

COGS is deducted from revenue to determine gross profit.
Lower COGS contributed to a higher gross margin this quarter.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Manufactured

It includes material, labor, and overhead costs in manufacturing.
Their COGM was calculated to evaluate production efficiency.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Sold

COGS is essential for tax purposes and financial reporting.
Accurate COGS calculation was crucial for their tax filings.
Aimie Carlson
Nov 30, 2023

Cost Of Goods Manufactured

COGM is used to assess the cost control in manufacturing processes.
A reduction in COGM showed improved cost management.
Janet White
Nov 30, 2023

Cost Of Goods Sold

It reflects the cost of goods that have actually been sold.
The store's COGS helped in understanding the profitability of sales.
Aimie Carlson
Nov 30, 2023

Cost Of Goods Manufactured

It reflects the total production cost before goods are sold.
The company's COGM was critical for year-end inventory valuation.
Sawaira Riaz
Nov 30, 2023

Cost Of Goods Sold

It includes direct costs like materials and labor for sold goods.
Their COGS increased in line with higher sales volumes.
Huma Saeed
Nov 30, 2023

FAQs

What is the Cost of Goods Manufactured?

It's the total cost involved in producing goods, including materials, labor, and overhead.
Sawaira Riaz
Dec 06, 2023

When is COGM calculated?

COGM is calculated before the sale of goods, usually at the end of a production cycle.
Sawaira Riaz
Dec 06, 2023

What does COGS represent in financial statements?

COGS represents the direct costs associated with goods that have been sold, affecting gross profit.
Aimie Carlson
Dec 06, 2023

How is the Cost of Goods Sold defined?

It's the cost of inventory that has been sold, including direct costs like materials and labor.
Huma Saeed
Dec 06, 2023

What impact does COGS have on gross profit?

COGS is deducted from sales revenue to determine gross profit.
Sawaira Riaz
Dec 06, 2023

Does COGM include labor costs?

Yes, COGM includes direct labor costs involved in manufacturing the goods.
Janet White
Dec 06, 2023

Are overhead costs part of COGM?

Yes, manufacturing overhead costs are included in COGM.
Harlon Moss
Dec 06, 2023

Can COGS affect a company's taxable income?

Yes, COGS is deducted from revenue, thereby affecting taxable income.
Sawaira Riaz
Dec 06, 2023

How does COGM impact inventory valuation?

COGM affects the value of inventory on the balance sheet, reflecting the cost of completed goods.
Harlon Moss
Dec 06, 2023

Is COGM relevant for all types of businesses?

COGM is mainly relevant for manufacturing and production-based businesses.
Aimie Carlson
Dec 06, 2023

Can COGM change with production efficiency?

Yes, improvements in production efficiency can reduce COGM.
Harlon Moss
Dec 06, 2023

Does COGM include indirect costs?

COGM includes indirect manufacturing costs like factory overhead.
Sawaira Riaz
Dec 06, 2023

How does COGM relate to product pricing?

COGM influences the base cost, which is critical in setting product prices.
Harlon Moss
Dec 06, 2023

Are returns and allowances part of COGS?

No, returns and allowances are treated separately from COGS in accounting.
Aimie Carlson
Dec 06, 2023

How is COGS used in pricing strategy?

COGS is used to determine the minimum selling price to ensure profitability.
Sawaira Riaz
Dec 06, 2023

How do sales volume changes affect COGS?

COGS increases or decreases in line with changes in sales volumes.
Harlon Moss
Dec 06, 2023

Is COGS the same as selling expenses?

No, COGS is related to the cost of goods sold, while selling expenses are costs incurred in selling the product.
Sawaira Riaz
Dec 06, 2023

Are discounts considered in COGS?

No, discounts are not included in COGS; they are treated separately in financial statements.
Janet White
Dec 06, 2023

Can COGM be used for budgeting?

Yes, COGM is a crucial figure for budgeting in manufacturing processes.
Janet White
Dec 06, 2023

Is depreciation included in COGS?

Depreciation of production equipment is typically included in COGS.
Sawaira Riaz
Dec 06, 2023
About Author
Written by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Huma Saeed
Huma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.

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