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COGS – Cost of Goods Sold

Definition updated on November 2023

What does COGS (Cost of Goods Sold) represent and how does it impact profitability?

The total direct costs associated with producing or acquiring goods that have been sold by a business during a specific time period. These costs can include material costs, direct labor, manufacturing expenses, and other costs directly tied to the creation of the specific product. In the sneaker reselling world, COGS would typically refer to the amount a reseller spent to acquire the sneakers they've sold. For example, if a reseller buys a pair of sneakers for $100 and then sells them for $150, the COGS for that sale is $100. Understanding COGS is essential for sneaker resellers as it plays a crucial role in determining profitability. By subtracting the COGS from the sales price, resellers can calculate their gross profit for each sneaker sale. Knowing this helps resellers price their sneakers strategically to ensure they cover their costs and make a profit. Moreover, tracking COGS effectively can also assist resellers in identifying which sneakers offer the best profit margins and which ones might be more challenging to make a profit on. In essence, COGS provides a clear picture of the actual cost associated with the sneakers being sold, enabling resellers to make informed decisions about pricing, inventory management, and overall business strategy.

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