The Cost of Goods Sold (COGS) is an essential metric for businesses as it indicates the direct costs attributable to the production of the goods sold. This calculator simplifies the COGS calculation, helping you manage your inventory costs effectively.
How to Calculate COGS?
1. Enter the value of your beginning inventory, which is the inventory at the start of the period.
2. Input the total purchases made during the period.
3. Provide the ending inventory value, which is the inventory left at the end of the period.
4. Click 'Calculate COGS' to find your total cost of goods sold.
COGS Formula
The formula to calculate COGS is as follows:
COGS = Beginning Inventory + Purchases - Ending Inventory
Example Calculation
If your beginning inventory is $5,000, purchases amount to $10,000, and ending inventory is $3,000, the COGS would be calculated as:
COGS = $5,000 + $10,000 - $3,000 = $12,000
Importance of COGS
Understanding your COGS is vital for setting pricing strategies, calculating gross profit, and assessing your business's profitability. By tracking COGS, you can make informed financial decisions that drive your business forward.