What does the cost of goods sold (COGS) represent?

The cost of goods sold (COGS) represents the value at cost of goods that were sold during a specific period. It provides a direct measure of the costs incurred in producing or purchasing the products that a business has sold. Understanding COGS is essential for determining gross profit, which is calculated by subtracting COGS from total revenue. This figure reflects the efficiency of a business in managing its production and inventory costs.

The other options do not accurately represent the nature of COGS. Markup on merchandise refers to the difference between the cost of goods and their selling price; it does not reflect what was actually incurred as an expense. Revenue generated from sales refers to the income earned from selling goods or services but does not account for the costs associated with those goods. Total inventory value represents the total worth of all inventory on hand, which is distinct from the costs associated with goods that have actually been sold. Thus, B is the only option that correctly defines COGS.