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What is Cost Of Revenue?

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Cost of revenue are the direct costs associated with revenue for a financial period. This appears on a firm's income statement. Cost of revenue is used, amongst other things, to calculate gross margins.

Direct Materials

Materials, ingredients, parts and components used in your products, services and packaging.

Direct Labor

Labor used to produce, inspect and deliver products and services.

Production Overhead

Overhead costs such as rent and utilities that can be directly tied to production of your products and services. For example, the rent for a factory or restaurant.


The cost of logistics including freight, warehousing and shipping goods to customers.

Inventory Adjustments

Inventory costs such as write-downs.

Import Duties & Tariffs

Costs for customs duties and tariffs on imported goods.
Any cost that can be directly tied to production of products and services can typically be included in cost of revenue.
Costs for sales and marketing, research & development and general administrative expenses are generally not included in the cost of revenue.
Overview: Cost Of Revenue
Direct costs incurred to generate revenue.
Also Known As
Cost of Goods Sold (COGS)
For a given item, cost and revenue are reported together. In other words, cost of revenue is matched to the revenue reported for a given period.
Related Concepts
Next: Cost Of Goods Sold

Business Costs

This is the complete list of articles we have written about business costs.
Applied Cost
Business Equipment
Capacity Cost
Capital Improvement
Carrying Costs
Closing Costs
Cost Of Capital
Cost Of Revenue
Cost Of Living
Direct Cost
Distress Cost
Fixed Costs
Friction Cost
Employee Costs
Holding Costs
Intangible Cost
Marginal Cost
Operating Cost
Operating Expenses
Legacy Costs
Outlay Cost
Lifetime Cost
Overhead Costs
Menu Costs
Relevant Cost
Normal Costs
Sunk Costs
Tangible Cost
Operational Costs
Travel Expenses
Unit Cost
Opportunity Cost
Variable Costs
Prospective Cost
Semi Variable Cost
Step Costs
Switching Costs
Transaction Costs
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