The direct cost of sales, also known as the prime cost, refers to the aggregate expenses directly tied to the production of a good or service, encompassing direct materials, direct labor, and direct expenses, while excluding overhead costs.
A method of inventory valuation in which cost of goods sold is charged with the cost of raw materials, semi-finished goods, and finished goods purchased 'first.' Under FIFO, the inventory contains the most recently purchased materials, and in times of rapid inflation, FIFO can inflate profits.
Gross margin represents the percentage of total sales revenue that a company retains after incurring the direct costs associated with producing the goods and services it sells. It is a critical metric for assessing a company's financial health and operational efficiency.
Gross profit, also known as gross margin or gross profit margin, is the difference between a company’s sales revenue and its cost of goods sold (COGS), excluding operating expenses such as finance, administration, and distribution costs.
LIFO (Last-In-First-Out) is an inventory valuation method where the most recently produced items are considered sold first.
