Directly beneath revenue, leading to gross profit: Revenue – COGS = Gross Profit. 

Negotiate supplier contracts, optimize production efficiency, or switch to cheaper materials without sacrificing quality. 

No. Operating or SG&A expenses happen after gross profit and include admin, marketing, and other overhead. 

Indirectly. High COGS may reflect heavy purchasing that ties up cash. Monitoring it helps time supplier orders.

Your COGS will be off by the same amount. Use regular physical counts or reliable software to tighten accuracy. 

Monthly if you manage inventory closely; quarterly at minimum. More frequent checks help catch margin erosion early. 

Pure service firms typically track “cost of services” (direct labour, subcontractors). The calculator still works—you’d enter labour purchases instead of materials.

For Canadian and most global reporting, FIFO or weighted average is common. Pick one and stay consistent unless you have a compelling reason to change. 

No. Freight-out (shipping to customers) is a selling expense. Only freight-in that brings materials to your warehouse counts in COGS. 

Use work-in-process records to value partially finished goods, then apply the same formula with those adjusted inventory figures.