COGS Calculator

COGS Formula

The formula to calculate the cost of goods sold is:

\[ \text{COGS} = \text{Beginning inventory} + \text{Purchases} - \text{Ending inventory} \]

Description

The Cost of Goods Sold (COGS) represents the direct costs attributable to the production of the goods sold by a company. This includes the cost of the materials and labor directly used to create the product. It is an important metric as it is subtracted from the company's revenues to determine its gross profit.

Beginning Inventory: The value of the inventory at the start of the accounting period.
Purchases During the Period: The total amount spent on purchasing additional inventory during the period.
Ending Inventory: The value of the inventory remaining at the end of the accounting period.

Example Calculation

Let's assume the following:

Beginning Inventory: $10,000
Purchases During the Period: $25,000
Ending Inventory: $8,000

To calculate the cost of goods sold:

\[ \text{COGS} = 10,000 + 25,000 - 8,000 = 27,000 \]

Therefore, the cost of goods sold is $27,000.

Cost of Goods Sold (COGS) Calculator

COGS Formula

Description

Example Calculation