Operating Expenses vs. COGS
Basis |
Operating Expenses |
Cost of Goods Sold (COGS) |
---|---|---|
Definition |
Encompasses all non-production-related expenses incurred in normal business operations. |
Specifically pertains to the direct costs tied to the production or purchase of goods. |
Scope |
Broader, covering a wide range of non-production-related operational costs. |
More focused on direct production or acquisition costs. |
Components |
Includes items like marketing, administrative costs, and research and development. |
Comprises raw materials, labor, and overhead directly tied to production. |
Usage |
Applicable to all industries and business types. |
Predominantly used in manufacturing and production-oriented business. |
Calculation |
Calculated by summing up various operational expenses. |
Derived by subtracting closing inventory from the sum of opening inventory and purchases. |
Tax Deductions |
Generally include tax-deductible operating expenses. |
Primarily comprises tax-deductible costs related to goods sold. |
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