Cost of Goods Sold (COGS)

"Cost of Goods Sold" or COGS is the total cost to produce a specific product or service. It includes all product or service related expenses, like labour, shipping, materials, machinery, rent, but does not usually include expenses like income tax, donations, gifts, meals, entertainment, and executive expenses, which are generally lumped together and referred to as "overhead" because they are not directly related to - or required for - the production of the product or service in question.

Some companies that manufacture products from scratch and also distribute and open retail locations to sell their products will differentiate between manufacturing COGS, distribution COGS, and retail COGS, so they can break down their costs in steps. Large corporations also tend to do this because it's easier to keep track of expenses and create tax shelters.

Marketing expenses can be considered a part of COGS, or it may be separated from COGS, depending on the company and industry. Some companies also include overhead and R&D as part of their COGS if these expenses are directly related to the creation of the product/service.

Generally speaking:

COGS + marketing + R&D + overhead = total business expenses

All the FIFO etc nonsense they teach business students is often nothing but arbitrary and ridiculous semantics. This is all you need to know: the "cost of goods sold" is how much it costs for someone to make something.