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Cost of Goods Sold (COGS) Calculator

Know the real cost behind every sale in seconds. Enter three numbers—Beginning Inventory, Purchases, Ending Inventory—and the calculator reveals your COGS instantly. No spreadsheets, no guesswork.

Set optimal prices and enhance your profit margin

How the Cost of Goods Sold Calculator Works

Open Inventory ($)

The value of all stock on hand at the start of the period.

Where to Find It

Last period’s closing inventory figure (from your balance sheet).

Purchases ($)

Total cost of raw materials or finished goods bought during the period.

Where to Find It

Supplier invoices plus freight-in and duties.

Closing inventory ($)

The value of stock still on hand at period-end.

Where to Find It

Latest physical count or POS/ERP report.

The tool applies the standard cost of goods sold formula:

COGS = Opening Inventory + Purchases – Closing Inventory

The answer appears instantly, along with a simple chart that compares COGS to revenue so you can spot margin squeeze at a glance.

Why COGS Matters

Tax savings. COGS is a tax-deductible expense. Recording it right lowers your taxable profit.

True profit picture. Subtract COGS from revenue to see gross profit. If margins look thin, you know where to act fast.

Pricing insight. Rising COGS without a matching price-rise signals shrinking margins.

What Counts in COGS Include

Raw materials & ingredients
Direct labour tied to production
Freight-in, import duties
Factory overhead (if using absorption costing)

What Counts in COGS Exclude

Sales & marketing spend
Office rent & utilities
R&D costs
Customer shipping (post-sale)

Example Calculation

Scenario: A coffee roaster starts the quarter with $15,000 of green beans on hand. They buy another $40,000 during the quarter and finish with $12,000 left.

COGS = 15,000 + 40,000 – 12,000 = $43,000

If sales were $75,000, gross profit equals $32,000 and gross margin is 42.7 %.

How Bookkeeping at Orbit Accountants Works?

Step 1

Compare against budget

Are you overspending on inputs?

Step 2

Benchmark your industry

Search “average COGS in ___ sector” to gauge efficiency.

Step 3

Adjust reorder points

High closing inventory? Reduce next purchase to free cash.

Step 4

Refine pricing

Feed COGS into your markup targets to protect margins.

Five Ways to Lower COGS

Negotiate supplier rates. Even 2 % off materials lifts margins.
Buy in economic order quantities. Reduces carry costs.
Track waste. Small scraps add up fast.
Automate stock counts. Less human error, tighter numbers.
Review pricing quarterly. Pass unavoidable cost hikes to the market promptly.

Orbit Accountants Client Journey: From Signup to Go Live

Frequently Asked Questions

Where does COGS appear on the income statement?Sujatakhedekar99@gmail.com2025-05-06T13:04:20+00:00

Where does COGS appear on the income statement?

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

How can I lower my COGS?Sujatakhedekar99@gmail.com2025-05-06T13:03:43+00:00

How can I lower my COGS?

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

Is COGS the same as operating expensesSujatakhedekar99@gmail.com2025-05-06T13:01:33+00:00

Is COGS the same as operating expenses

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

Does COGS affect cash flow?Sujatakhedekar99@gmail.com2025-05-06T13:00:51+00:00

Does COGS affect cash flow?

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

What if my closing inventory estimate is off?Sujatakhedekar99@gmail.com2025-05-06T13:00:23+00:00

What if my closing inventory estimate is off?

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

How often should I calculate COGS?Sujatakhedekar99@gmail.com2025-05-06T12:53:34+00:00

How often should I calculate COGS?

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

Can service businesses calculate COGS?Sujatakhedekar99@gmail.com2025-05-06T12:53:02+00:00

Can service businesses calculate COGS?

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

Which inventory method should I use—FIFO, LIFO, or weighted average?Sujatakhedekar99@gmail.com2025-05-06T12:52:27+00:00

Which inventory method should I use—FIFO, LIFO, or weighted average?

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.

Does freight-out belong in COGS?Sujatakhedekar99@gmail.com2025-05-06T12:51:50+00:00