Logiwa Resource
Cost of Goods Sold (COGS) Calculator
costs of products sold and accurately assess your gross profit.
Cost of Goods Sold (COGS) Formula:
Using the formula
Let’s say:
Beginning Inventory = $10,000
Purchases During the Period = $15,000
Ending Inventory = $8,000
Now, using the formula:
COGS = $10,000 + $15,000 – $8,000 = $17,000
This means the business’s cost of the goods sold during the period is $17,000.
This COGS is important for calculating gross profit and helps to understand the direct costs involved in producing or purchasing the products that were sold.
Cost of Goods Sold Calculator
Explanation of
the formula
Here’s how each part of the formula works:
- Beginning Inventory: This is the value of the inventory that a business has at the start of the accounting period. It includes goods that were not sold during the previous period and are carried over into the new one.
- Purchases During the Period: This refers to any inventory that was bought or produced during the current period. This could include raw materials, finished goods, or additional stock purchased for resale.
- Ending Inventory: This is the value of the inventory that remains unsold at the end of the accounting period.
The formula calculates the cost of the goods that were actually sold during the period. To break it down:
- You start with the inventory you had at the beginning of the period.
- You add any new purchases made throughout the period.
- Then, you subtract the value of the inventory you still have at the end of the period.
The difference between these amounts represents the Cost of Goods Sold (COGS), which is the total cost of the goods that were sold to customers during the period.
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