Cost of Goods Sold, or COGS, is an important number on a company’s income statement. It represents the cost associated with buying and making a product or service that was sold over a certain period of time. This includes the direct costs of materials and labor associated with producing that item. It also includes other expenses such as shipping, insurance, and depreciation of equipment used in the production process. Knowing how much it costs to produce a product or deliver a service is essential for understanding the company’s profitability.