Enter the value of the beginning inventory, total value of purchases, and the ending inventory value into the calculator to determine the cost of goods sold.
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Cost of Goods Sold Formula
The following equation is used to calculate the total cost of goods sold.
COGS = B + P – E
- Where COGS is the cost of goods sold
- B is the beginning value of inventory
- P is the total value of purchases
- E is the ending inventory value
COGS stands for cost of goods sold and is a measure of the true cost of a sold item.
Cost of Goods Sold Example
How to calculate cost of goods sold
- Fist, determine the beginning inventory value
Calculate the total value of your inventory before any goods are sold.
- Next, determine the total value of purchases made
Calculate the total value of the items sold during the time period being analyzed.
- Next, determine the ending inventory value
Calculate the value of your inventory after items have been sold.
- Finally, calculate the COGS
Calculate the cost of goods sold using the formula above and information from steps 1-3.
The cost of goods sold, also known as the COGS, is the monetary value of the the cost of the items sold during a specific time period.
Analyzing the COGS can allow businesses to make quick decisions on purchasing additional inventory and adjusting prices.