Information
For any small firm to succeed, profit is essential. If you own a manufacturing company, you must know how to compute your cost of goods sold and have a solid understanding of it to figure out your operation's profitability. Here are some essential details and instructions for figuring out your company's cost of goods sold (COGS).
What is Cost of Goods Sold Calculator(COGS)?
The Cost of Goods Sold (COGS) reflects a company's direct costs to produce the goods they sell during a period. This includes the cost of materials, labor, and directly related overhead used in production. COGS helps assess a company's efficiency in managing production costs and pricing strategy. It's a key metric on the income statement for both internal analysis and understanding a company's financial health.
How to Use Jordensky COGS Calculator?
Using Jordensky Cost of Goods Sold COGS calculator is simple. All you need to do is enter the figure for your Beginning Inventory, add your Purchases in Current Period and your Ending Inventory. The calculator will automatically calculate the Cost of Goods Sold, which will appear underneath in big, bold letters.
The 3 key things you need
- Beginning Inventory
- Purchases in Current Period
- Ending Inventory
Cost of goods sold formula!
Beginning inventory + Purchases in Current Period – Ending inventory = COGS
Cost of goods sold Example:
Assume you are a bakery owner. You can compute your COGS for a given month in the following way
Beginning Inventory: INR 5,000 (the amount of wheat, sugar, eggs, and other items you have at the start of the month)
Purchases in Current Period : Purchases made during the current period: Rs. 10,000 (the total cost of all the ingredients you purchased that month).
Ending Inventory : Rs. 2,000 is the ending inventory, or the amount of ingredients left at the end of the month.
How to calculate Cost of Goods Sold Calculator(COGS)?
Step 1: Gather Information
Starting Inventory: This is the total value of your supplies at hand at the beginning of any time period, like a month. Eg you may have eggs, sugar and flour that cost around Rs. 5000.
Purchases: This is what it cost to buy all those ingredients over the period thus can be called total expenses on purchase of raw materials. Keep all receipts for purchases of flour, sugar, eggs and other supplies throughout the month. You could assume you spent Rs. 10,000 on getting these items.
Ending Inventory: These are the products that will not be used in baking as of last day of this month or in other words unused ingredients at the end of this month. Quantify them by counting out all the left-over sugar, flour and eggs etc., e.g about Rs 2,000 worth of remaining stockpiled inputs for current productions will include flour, sugar and eggs only.
Step 2: Apply the Formula
Now, we plug these values into the COGS formula:
COGS = Beginning Inventory + Purchases - Ending Inventory
COGS = Rs. 5,000 + Rs. 10,000 - Rs. 2,000
Step 3: Calculate COGS
COGS = Rs. 13,000
Interpretation:
In this example, your COGS for the month is Rs. 13,000. This signifies the total cost of ingredients used to produce the bakery items you sold during the month.
Remember:
A higher COGS typically means a lower gross profit (revenue minus COGS) as it reflects a higher cost of producing the goods you sold. COGS is crucial for businesses that sell physical products. The specific COGS calculation might vary depending on the accounting method used (e.g., FIFO, LIFO).
Tip: It's a good practice to maintain proper records of your inventory and purchases to ensure accurate COGS calculations.