Enter the total amount of purchases, purchase returns and allowances, purchase discounts, and inbound freight to determine the cost of goods purchased (COGP).

Cost of Goods Purchased Formula

The following formula is used to calculate the cost of goods purchases: 

COGP = P - R/A - D + F
  • Where COGP is the cost of goods purchased ($)
  • P is the total amount of purchases ($)
  • R/A are any purchase returns or allowances ($)
  • D are any purchase discounts ($)
  • F is inbound freight ($)

To calculate cost of goods purchased, subtract the returns or allowance and purchase discounts from the total amount of purchases, then add the inbound freight cost.

Definition

What is a cost of goods purchased?

Cost of goods purchased, or COGP for short, is a measure of the total amount cost a lot of goods cost to purchase after return, discounts, and freight have been taken into account.

In general, this is used similarly to COGS, which is cost of goods sold, but it is used when the items are purchased instead of when and if they are sold.

Example Problem

How to calculate cost of goods purchased?

First, determine the total cost of the goods that are being purchased. In this example problem, there were 100 items purchased at an average price of 10$, so the total purchase price was $1,000.00.

Next, determine any returns or allowances that occurred on the purchase. 5 items were found to be defective in this case, so they were returned. This nets a total return of $50.

Next, determine any discounts. For this purchase, a discount of 1$ per item was given. This leads to a total discount of $100.00.

Next, determine the cost of the inbound freight if paid by the purchaser. In this example, the freight cost $200.00.

Finally, calculate the cost of goods purchased using the formula above:

COGP = P – R/A – D + F

COGP = $1000 – $50 – $100 + $200

COGP = $1050.00