"The variable costs include things like direct labor, inventory or raw materials, sales and commissions as well as overhead. Basically everything that goes into making the product. This is all important to note because if you don't account for everything included in the work-in-progress inventory, then you'll be short of inventory in the long run."

COGS is Cost of Goods Sold and the P&L is the Profit and Loss statement. It's important to know the acronyms as well as what's on the documents they indicate.

Variable costs are expenses incurred based on the production volume. Examples of common variable costs include raw materials, packaging, and labor directly involved in a company's manufacturing process.

"On the variable costs located on the Profit and Loss statement, the cost of goods sold refers to the finished product. The variables included in that finished product are raw materials, packaging, and labor ."