Understanding Income Statement: Cost of Goods Sold (COGS)

COGS is what you spend to grow, harvest, and get your apples ready for sale. This includes the cost of seeds or young apple trees, fertilizer, water, and paying helpers to pick apples. If it’s a direct cost tied to the apples you actually sell, it’s included in COGS. The higher your production costs, the more it eats into your profits. For example, if you spent $40 to grow the apples you sold, your COGS is $40. It’s the price of making your apples and is subtracted from revenue to show gross profit.