What type of costs does COGS specifically refer to?

Cost of Goods Sold (COGS) specifically refers to the direct production costs associated with the manufacture of goods that a company sells during a specific period. This includes all the expenses directly tied to the production process, such as raw materials, direct labor, and any other costs that are directly attributable to the creation of the product.

Understanding that COGS focuses on direct production costs is crucial because it plays a significant role in calculating gross profit. By subtracting COGS from revenue, a business can determine its gross profit, which then informs financial performance and pricing strategies. The accuracy of COGS is vital for inventory valuation, and it impacts the income statement significantly, thereby influencing the company's financial health.

The other choices do not appropriately capture the nature of COGS. Non-production expenses are unrelated to the manufacturing process, variable and fixed overhead costs typically encompass broader categories that might not directly tie to a specific product, and sales and distribution expenses fall outside of the production costs as they deal with the costs incurred after the goods are produced.