Cost of Goods Sold Calculator

Cost of Goods Sold Calculator 

This cost of goods sold calculator helps to determine the total cost of producing or acquiring the goods that were sold. It can make step-by-step cost of goods sold (COGS) calculations using the relevant financial data. By addressing COGS, you can make informed financial decisions, enhance cost management, and even improve the overall business performance. 

What is the Cost of Goods Sold?

“COGS shows the total expenses involved in producing the products over a particular period”

Cost of goods sold (COGS) includes raw materials, labor expenses, and manufacturing overhead. It's important to note that this cost excludes indirect expenses like sales and marketing costs, administrative expenses, and research and development costs. COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin. Higher cost of goods sold results in lower margins.

How to Calculate Cost of Goods Sold?

The COGS formula is used to calculate the cost of inventory sold, let's have a look at the formulas:

COGS = Starting Inventory + Purchases – Ending Inventory

In the Equation:

• Starting Inventory → The overall worth of a business's stock that is available for sale at the beginning of the new accounting cycle. 

• Purchases in Current Period → The overall expense of extra or new inventory purchased during the accounting period. 

• Ending Inventory → The goods that are unsold during the current period. 

This cost of goods sold calculation can help to know the total cost of inventory sold during a specific period. Besides that, you can also use this online cost of goods sold calculator to find the direct cost of product sales.

Example:

Suppose a small bakery that is situated in the middle of the city. The bakery kicked off its first month with $3,750 worth of supplies. They spent an extra $3,000 on ingredients throughout the month. By the end, they had $1,000 worth of ingredients left over. Find the total cost of ingredients used in production during the month.

Given Values:

• Starting Inventory = $3,750
• Purchases = $3,000
• Ending Inventory = $1,000 

Solution (Step by Step)

Put the given data into the formula to calculate cost of goods sold:

COGS = $3,750 + $3,000 - $1,000 

COGS = $5,750

The total cost associated with the bakery's sold items for that specific month is $5,750. This represents the total cost of the ingredients and supplies used to produce the baked goods they sold during the month.

FAQs (Cost of Goods Sold)

Is the cost of goods sold (COGS) important?

COGS is an important factor that helps to know about the financial statements by finding the direct cost associated with the sold inventory. Furthermore, it also evaluates how efficient a company is in managing its labor and supplies in the production process. 

Who uses the cost of goods sold?

• Business owners and managers
• Investors and analysts
• Creditors and lenders
• Government agencies
• Accountants and auditors
• E-commerce businesses and retail stores

Cost of sales vs cost of goods sold: What’s the difference? 

➥ Cost of Goods sold focuses on the expenses related to the manufacturing products from material

➥ Cost of Sales represents the expenses related to the production and selling of inventory or services.

Is COGS a revenue or expense?

COGS is not a revenue nor a tax liability. Generally, it is the business expense. Also, know that the cost of goods sold is not factored into net sales. 

What is included in the cost of goods sold?

The cost of goods sold may include

• The material involved in producing the products or carrying out the services
• Human resources involved in crafting a product or performing a service
• Indirect expenses associated with production (such as the cost of electricity for operating an assembly line)