Cost of Goods Sold

COGS includes all expenses directly related to making and storing a company's goods.

For instance, this includes raw materials, production costs, warehousing, labour costs, indirect costs such as machine setup, Depreciation of equipment.

Comparing different businesses:

• An auto manufacturer like GM would have higher COGS/Sales ratio because it has substantial material, labor, and manufacturing costs, while Facebook has minimal physical production costs.
• A mass market clothing manufacturer like H&M would typically have higher COGS/Sales as they operate on lower margins than high-end mobile phone manufacturers like Apple, who can maintain higher profit margins despite significant component costs.

Raw material expenses refer to the costs of unprocessed materials used in the production of goods.

• An auto manufacturer would have higher raw material expenses in absolute terms due to the cost of metals, electronics, plastics, and other components needed for vehicle production.

Transportation expenses are the costs associated with moving goods from production facilities to storage or to customers.