COGS — Cost of Goods Sold (Cost of Sales)

Definition

Costs directly attributable to delivering the product or service that generated revenue. In SaaS: production cloud infrastructure, usage-billed APIs, payment processing, customer support. Excludes sales & marketing, R&D, and G&A.

Formula

Gross Profit = Revenue - COGS
Gross Margin % = Gross Profit / Revenue

Worked Example

April revenue $50,000. Direct delivery costs:

AWS (production)               $6,000
Twilio SMS (customer OTP)        $900
Stripe fees (2.9%)             $1,450
Support engineer (allocated)   $4,000
-------------------------------------
COGS                          $12,350

Gross Profit = $50,000 - $12,350 = $37,650
Gross Margin = 75.3%

Interpretation & Pitfalls

COGS scales with revenue — it is the marginal cost of serving customers. Healthy SaaS gross margin: 70-85%. Below 60% signals infrastructure or support costs eating the business.

In TupicFinance

COGS is assembled per service from categorized cost items and usage drivers, producing the per-service Cost of Sales breakdown.