Cost of Goods Sold (COGS) is an accounting term used to describe the total amount spent to produce a product or service for sale. It includes direct costs such as materials, labor, and overhead. The goal of COGS is to determine how much of your sales are actually contributing to profit. Tracking COGS is a key part of understanding profitability – it allows you to see where resources are being wasted and adjust accordingly. By tracking COGS, businesses can identify areas where they need to invest more resources in order to ensure long-term success.