Total direct costs incurred to produce goods sold during a period.

What it Measures ?

What we spend to make our products.

Relevant StakeHolders 

Finance Team, Operations

Why it Matters ?

Helps monitor profitability and pricing strategies by tracking production and delivery costs.

In-depth Use Case / Real-world Example

COGS includes raw materials, labor, and overhead directly tied to production. Suppose a machine tool manufacturer sells ₹1 crore worth of machinery in a quarter, and production costs (materials, machining hours, factory labor) total ₹60 lakhs. Then, the COGS is ₹60 lakhs. High COGS eats into profit margins and can make products less competitive. Sales leaders track this to understand profitability, price negotiations, and discount thresholds. When COGS rises (e.g., due to steel price hikes), sales and procurement must coordinate to adjust pricing or reduce input costs. Understanding COGS helps sales teams sell profitably while maintaining competitiveness.