COGS Allocation for Amazon Brands: What Goes In and What Stays Out
Which costs belong in COGS for an Amazon FBA brand vs. operating expenses? How you classify costs changes your contribution margin calculation — and your understanding of unit economics.
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Run the numbers →What belongs in COGS for FBA brands
Product cost (factory cost + inbound freight + duties + prep/inspection) belongs in COGS. These are costs that vary directly with units produced and shipped.
FBA fees and Amazon costs (referral, FBA fee, storage) are typically classified as cost of goods sold or cost of revenue for Amazon brands — they vary with each unit sold and are necessary to complete the sale. Some brands classify them below COGS as "selling expenses" — both are defensible, but you need to be consistent.
What doesn't belong in COGS: salaries, software subscriptions, marketing overhead, product development. These are operating expenses.
Frequently asked questions
Should Amazon FBA fees be in COGS or operating expenses? ▾
Common practice is to include referral fees and FBA fees in cost of revenue (a component of gross profit calculation). Storage and aged inventory are sometimes treated as operating expenses since they relate to inventory holding rather than the sale itself. Pick a convention and be consistent.