Sign up for free No credit card required When COGS gets confusing Depending on the industry, traditional operating expenses could be a COGS instead. COGS does not include marketing, sales, or administrative expenses. For a service company, COGS would include direct costs related to providing the service. For a manufacturing business, these would include manufacturing labor, raw materials, certain transportation costs, and other costs directly related to the manufacturing process. What is included in COGS? COGS includes all direct costs of generating revenue. Some accountants consider OPEX and SG&A to be the same, while others draw subtle distinctions between the two. However, COGS and SG&A are mutually exclusive categories of expenses, and SG&A is commonly used as a synonym for operating expenses. COGS vs SG&A As with operating expenses, many folks confuse COGS with selling, general, & administrative (SG&A) expenses. However, COGS may include some fixed costs for certain types of businesses. In high-revenue months, COGS will be higher, and similarly it will be lower in lean months. Sign up for free No credit card required Is COGS a fixed or variable cost? COGS is mostly variable costs, since it consists of expenses directly related to revenue production. OPEX: Electricity costs for store and office. Gas station COGS: Transportation of fuel. Software company COGS: Website development and hosting cost. OPEX: The monthly lease payment to operate the store. Coffee shop COGS: The paper cups needed to serve hot coffee to customers. Examples of OPEX vs COGS To help you get a handle on operating expenses vs COGS, here are some hypothetical examples. Any company expense must fit into one or the other of these two cost categories.
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