Net Sales Cost of Goods Sold (COGS) is the measure of how much a company spends to produce, procure and deliver inventory – or goods – to its customers. It’s what a business pays for the materials, labor, and overhead costs associated with making and selling a product or service. COGS is an important part of determining a company’s overall profitability and it can tell you whether they’re efficiently managing their expenses and generating enough revenue to remain in business. By understanding this key indicator, businesses can make better decisions about how much to charge for their products or services and set realistic pricing goals.