Do Distribution Cost and Marketing&Sales include into COGS?

Question

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

Answer 1

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

Answer 2

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

Answer 3

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.