![]() Necessary cookies are absolutely essential for the website to function properly. So, the bakery’s total cost per loaf is $3 ($2 COGS + $1 operating costs). However, the bakery also has operating expenses like rent, utilities, and salaries, which add up to $1 per loaf. This means that the bakery’s COGS is $2 per loaf. Let’s say a bakery sells bread for $5 per loaf, and the cost of producing each loaf of bread is $2. Here’s an example to illustrate the difference: Unlike COGS, operating costs are not directly tied to the production or sale of goods, but they are necessary for running a business. These costs include expenses like rent, utilities, marketing, and salaries. While COGS is directly related to the production and sale of goods, operating costs are expenses that are necessary for running a business, but are not directly related to the production of goods.
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