![]() Fixed costs are not considered part of the cost of goods sold. Examples of variable costs that are calculated as part of COGS include the cost of raw materials, manufacturing costs, product packaging, direct labor, freight, and any other costs that can be directly attributed to making and selling the product. Variable costs are those that are directly incurred in the production of goods and those that may vary depending on the amount of goods being produced. During the calculation of cost of goods sold, only variable costs are considered. Cost of goods sold (COGS): This refers to all the expenses that the business incurs while making products and delivering services.Revenue is usually the top line in an income statement. Revenue reflects to all the money earned from the sale before any deductions have been made. Revenue: This refers to the income earned after products or services are sold.In this article, we are going to explain the difference between margin and mark up and explain why it is important to tell each apart from the other.īefore we go into the differences between margin and markup, it is important to first understand three terms which will come in handy when calculating both the margin and the markup. They show different information and are accounted differently. ![]() ![]() However, margin and markup are totally different things. ![]() The confusion between the meaning of the two terms stems from the fact that the same inputs are used to calculate both markup and margin, and the two of them provide information about the same transaction. Many business owners do not know that there is a difference between the two terms, and unfortunately, the confusion between the two terms can negatively affect the bottom line of your business. I cannot count the number of times I have heard someone use the words markup and margin interchangeably. ![]()
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