Do Distribution Cost and Marketing&Sales include into COGS?

COGS
Recent activity on Jan 27, 2019
3 Answers
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Eva
Skilled
asked on Jan 27, 2019
Interview received from MBB, actively preparing, 40+ mock experience

Hi all,

My understanding is: Distribution Cost, Marketing&Sales are included in the COGS. But sometimes when I was doing a case, the distribution cost is not included in the COGS. I'm not from accounting / economics major, so I'm learning now.

Do I have any misunderstandong here? Many thanks for sharing

Best, Eva

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Vlad
Expert
Content Creator
replied on Jan 27, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It really depends:

  • Distribution costs may / may not be included in COGS. You can check with the interviewer. However, Both are VC costs
  • Marketing and sales costs are usually not the part of COGS. Most often they are fixed costs, however, some types of marketing costs (e.g. fist trial discounts and subsidies) may be variable.

Best

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Eva on Jan 28, 2019
Thanks a lot!

(edited)

Chen replied on Jan 27, 2019
Looking for someone in Israel to prep with

You're right. Distribution cost is not included in the COGS.

COGS is the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs.

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Guennael
Expert
replied on Jan 27, 2019
Ex-MBB, Experienced Hire; I will teach you not only the how, but also the why of case interviews

Usually, COGS only include the direct costs directly attributable to the production of your widget; HOWEVER, some companies will have creative ways to define what a COGS is.

My recommendation is to exclude distribution costs, and marketing & sales, but ask to confirm that is appropriate to the case you are doing.

First hit on Google: https://www.investopedia.com/terms/c/cogs.asp

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Vlad gave the best answer

Vlad

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