For business executives and leaders, understanding COGS is essential for several reasons: 1. Profitability Analysis: By calculating the COGS, leaders can determine the gross profit of their business. This helps in understanding how efficiently the company is producing its goods and whether the pricing strategy is effective. 2. Cost Management: Leaders need to manage and control the COGS to maximize profitability. This involves negotiating with suppliers, optimizing production processes, and reducing waste. 3. Pricing Strategy: COGS directly influences the pricing strategy. Leaders must ensure that the prices set for products cover the COGS and contribute to the desired profit margins. 4. Budgeting and Forecasting: Accurate COGS figures are vital for budgeting and forecasting. They help in planning for future expenses and setting financial goals.