On a company’s balance sheet, Cost of Goods Sold (COGS) is the total cost of producing and delivering the products or services that it sells to customers. This cost often includes raw material costs, direct labor costs, manufacturing overhead costs and distribution costs. COGS also acts as a measure of how efficiently a company produces and distributes its products or services. By keeping track of COGS, businesses know how much they are spending on production and distribution and can monitor their performance more accurately.