Calculate Cost Of Goods is a business term that describes the process of determining the cost of raw materials, labor, and overhead associated with the production of an item or service. The calculation of cost of goods should be done before a product or service can be priced accurately and fairly. This is an important process for many businesses as it allows them to calculate their total cost of production and set competitive prices for their products. It also helps businesses identify areas where costs can be cut back. Calculating your costs of goods accurately can help your business stay profitable.