Profit
What is COGS?
Cost of Goods Sold
What the units you sold cost you to buy or make, counted only when they sell rather than when you bought them. It is the first thing subtracted from revenue, so an error here quietly moves every margin number downstream.
Why it matters in practice
COGS is where most unit economics go wrong, because it is easy to count the invoice price from the supplier and stop there. The number that belongs in COGS is what the unit truly cost to have on hand and ready to sell, which usually means the factory price plus freight, duty, and inbound handling. It is also an accrual, not a payment: the cost lands in the month the unit sells, not the month you wired the deposit, which is exactly why a business can post a strong profit month right after a large inventory purchase drains the bank account. If you buy the same product at two different prices across two production runs, decide once how you will value the units sold and stay consistent, because switching methods midstream makes month over month margin meaningless.
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