Cost of goods sold (COGS) is the direct cost of producing or acquiring the goods a business sells. It typically covers raw materials, components, and the manufacturing labor tied directly to each unit, but not indirect costs like rent, marketing, or salaried admin staff. In quoting, COGS is the floor: it is the number you build margin and markup on top of to reach a sell price.
How it works
For a resold product, COGS is usually your landed unit cost (supplier price plus freight and duties). For a manufactured product, COGS adds up direct materials and direct labor per unit. Once you know COGS, price follows one of two paths: markup (cost multiplied by a factor, so 40 dollars cost with a 50 percent markup becomes 60 dollars) or margin (price set so profit is a target percentage of the sell price). The two are not the same number, which trips up a lot of quotes.
Why it matters in B2B quoting
B2B buyers ask for volume, custom bundles, and negotiated terms, so a single retail price rarely holds. Knowing COGS per line item lets you discount with confidence and see exactly where a quote stops being profitable. If you quote 500 units at a tier price, COGS tells you whether that tier still clears your minimum margin or quietly loses money.
Example
A part costs 12 dollars in materials and 3 dollars in direct labor, so COGS is 15 dollars. To hold a 40 percent gross margin, you quote it at 25 dollars (15 divided by 0.60). Drop to a 20 dollar volume price and your margin falls to 25 percent, still positive but tighter.
Because COGS drives every discount decision, it helps to quote from a system that keeps cost and price side by side rather than a static PDF. See the B2B quoting glossary for related terms like margin, markup, and landed cost.