Variable Cost of Goods Sold (COGS) is an official business term that describes the expenses related to producing and selling a product or service. These costs vary depending on the quantity of goods produced or services rendered, and include such things as raw materials and labor required for production. While some costs of producing a product—such as rent or administrative staff salaries—are fixed, COGS Variable Costs are associated with the direct production process, and can change if a company changes its manufacturing processes or the number of goods it produces. By keeping track of these costs, companies can identify where most of their money goes during the production process and decide how to best allocate resources for maximum profitability.