Costs of Goods Sold (COGS) is a line item on an income statement that reports the direct costs related to producing the goods sold by a company during a period. These costs can include the cost of materials, labor and other related expenses for the items that have been sold. COGS does not include indirect expenses such as distribution costs, marketing expenses, and other overhead. Knowing your COGS can provide insight into how much profit you are making from each sale and help you understand which products or services are providing the greatest return on your investment. By tracking trends in COGS, businesses can ensure they continue to remain profitable and adjust their strategies accordingly.