Cost of goods sold (COGS) measures the direct cost of inventory sold during a period. Retailers, restaurants, and manufacturers use it to calculate gross profit and monitor inventory efficiency.
How to use this calculator
- Enter inventory value at the start of the period.
- Enter total inventory purchases during the period.
- Enter inventory value at the end of the period.
- Review COGS, inventory change, and the efficiency indicator.
- Use the interpretation to connect COGS to profitability and stock management.
Formula
COGS = Beginning inventory + Purchases − Ending inventory. A positive inventory change means stock built up; a negative change means you sold down existing inventory.
Example
With $25,000 beginning inventory, $80,000 purchases, and $30,000 ending inventory, COGS is $75,000 and inventory increased by $5,000.
Frequently asked questions
What is included in COGS?
Direct costs of goods sold: product cost, raw materials, and direct labor tied to production. Operating expenses like rent and marketing are not COGS.
Why did my COGS exceed purchases?
When ending inventory is lower than beginning inventory, you drew down stock. COGS includes both purchases and the reduction in inventory value.
How often should I calculate COGS?
Monthly or quarterly for management decisions; annually at minimum for financial statements. More frequent tracking helps catch margin erosion early.
Does this calculator use FIFO or weighted average?
This uses the periodic inventory formula. Specific costing methods (FIFO, LIFO, weighted average) may produce different unit costs — consult your bookkeeper for formal statements.