Cost of Goods Sold Calculator
Cost of goods sold (COGS) ⇒ is the total of the costs directly attributable to producing items that were sold during the period. For each unit sold, cost of goods sold includes the direct material and direct labor costs of the unit and an allocation of a portion of manufacturing overhead costs.
Cost of goods sold ⇒ represents the cost to produce or purchase the units that were sold during the period. It is perhaps the largest individual expense item on the income statement, so it is important for cost of goods sold to be calculated accurately.
cost of goods sold formula
Cost of goods sold is calculated using the following formula:
| Beginning finished goods inventory | |
| + | Purchases for a reseller or cost of goods manufactured for a manufacturer |
| – | Ending finished goods inventory |
| = | cost of goods sold |
The formula above is a simplification of what is actually occurring because it assumes that all the units in finished goods inventory at the beginning of the period were either sold during the period or were still in finished goods inventory at the end of the period, which does not always happen. In reality, some units may be damaged, stolen or lost.