Cost of Goods Sold Calculator

Formula

The formula to calculate the Cost of Goods Sold (COGS) is:

\[ \text{COGS} = B + P - E \]

Where:

$ \text{COGS} $ is the Cost of Goods Sold ($).
$ B $ is the beginning inventory value ($).
$ P $ is the total value of purchases ($).
$ E $ is the ending inventory value ($).

What is Cost of Goods Sold (COGS)?

Cost of Goods Sold (COGS) represents the direct expenses incurred in producing or acquiring the goods a company sells. This includes materials, labor, and overhead costs directly tied to the production or purchase of inventory items. COGS is crucial for assessing a company's profitability as it directly impacts the gross profit.

Example Calculation

Let's consider an example:

Beginning Inventory Value (B): $5,000
Total Value of Purchases (P): $15,000
Ending Inventory Value (E): $4,000

Using the formula to calculate COGS:

\[ \text{COGS} = 5,000 + 15,000 - 4,000 = 16,000 \]

This means that the Cost of Goods Sold in this scenario is $16,000.