The cost of goods sold (COGS) is a key factor in pricing strategy as it represents the direct costs associated with producing the goods sold by a business. It includes material costs, direct labor costs, and direct factory overheads, and is directly proportional to the quantity of goods sold. As such, it's a crucial element in determining the selling price of a product. If the COGS is high, the selling price of the product will need to be set higher to ensure profitability. Conversely, if the COGS is low, the business has more flexibility to set a competitive selling price.
Need to evaluate the best pricing strategy for a product? This Pricing Strategy spreadsheet includes...
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