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Explain the cost of goods sold in production as you would to a capable student, in 3-4 sentences.

# Cost of Goods Sold (COGS) in Production Cost of Goods Sold represents the direct costs of manufacturing the products that a company actually sold during a specific period. It includes three main components: the raw materials used, the direct labor paid to workers who made the products, and the manufacturing overhead (like factory utilities and equipment depreciation) allocated to those units. To calculate it, you start with beginning inventory, add all production costs incurred during the period, then subtract ending inventory—this ensures you're only counting costs for items that were actually sold, not those still sitting in your warehouse. COGS is crucial because it directly reduces your gross profit on the income statement and helps determine your company's profitability.