Enter the beginning inventory, raw material cost, cost of direct labor, overhead manufacturing cost, and ending inventory to determine the cost of sales.
- Cost Function Calculator
- Fixed Cost Calculator
- Cost of Goods Manufactured Calculator (COGM)
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Cost of Sales Formula
The following formula is used to calculate the cost of sales.
COS = BI + R + DL + OM – EI
- Where COS is the cost of sales ($)
- BI is the value of the beginning inventory ($)
- R is the value of the raw material ($)
- DL is the cost of direct labor ($)
- OM is the overhead manufacturing cost ($)
- EI is the ending inventory value ($)
Cost of Sales Definition
A cost of sales is defined as the total value of costs involved in the production of a good or service.
Cost of Sales Example
How to calculate cost of sales.
- First, determine the beginning inventory value.
This will be the total value of all inventory at the start of the period being analyzed.
- Next, determine the cost of raw material.
This will be only the cost of the raw material used to directly make the goods.
- Next, determine the cost of direct labor.
Again, this is only labor that was directly used to produce the product.
- Next, determine the manufacturing overhead.
Calculate the total manufacturing overhead used.
- Next, determine the ending inventory.
Calculate the total value of the inventory at the end of the period being analyzed.
- Finally, calculate the cost of sales.
Calculate the cost of sales using the information in steps 1-5.
FAQ
What is cost of sales?
Cost of sales is a measure of the total costs associated with producing a good or service. This is typically a physical good, but can be associated with software and services as well.
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