The Bill of Materials (BOM) is just a subset of the Cost of Goods Sold (COGS), and if you aren’t selling your product for more than your COGS, you will lose money and go out of business.

COGS is calculated using direct production costs, excluding indirect expenses. Investors use COGS to assess gross profit: Gross Profit = Revenue - COGS. Lowering COGS while maintaining or ...

According to the rules of FIFO, if the bakery sells 200 loaves on Wednesday, the COGS (on the income statement) is $1 per loaf because that was the cost of each of the first loaves in inventory.