① Calculate COGS & Gross Profit
② Target Margin Pricing & COGS Planning
Set a desired gross margin or selling price based on your COGS. Optimize your pricing strategy.
Recent COGS Calculations
What is Cost of Goods Sold (COGS)?
Cost of Goods Sold (COGS) represents the direct costs attributable to the production of goods sold by a company. It includes material costs, direct labor, and overhead directly tied to production. The basic formula is:
COGS = Beginning Inventory + Purchases / Production Costs − Ending Inventory
Accurate COGS calculation is essential for determining gross profit and gross margin. It directly impacts your taxable income and profitability analysis. For retailers, COGS includes the purchase price of goods plus freight. For manufacturers, it includes raw materials, labor, and factory overhead.
Why it matters: Understanding COGS helps you price products profitably, manage inventory efficiently, and evaluate business performance. Our tool also helps you set prices based on target gross margins to achieve financial goals.
Key Formulas & Insights
COGS = Beginning Inventory + Purchases − Ending Inventory
Gross Profit = Revenue − COGS
Gross Margin % = (Revenue − COGS) / Revenue × 100
Target Selling Price (given COGS & desired margin) = COGS / (1 − Margin%)
Markup on COGS = (Price − COGS) / COGS × 100
Inventory Turnover (simplified) = COGS / Average Inventory
Frequently Asked Questions
COGS includes direct material, direct labor, and manufacturing overhead. For retailers, it’s the cost of inventory sold. Excluded are selling, general, and administrative expenses (SG&A).
Negotiate better supplier prices, reduce waste, improve inventory management, optimize production efficiency, or consider alternative sourcing.
It varies by industry: retail typically 20-50%, software 70-85%, manufacturing 25-35%. Use our tool to benchmark and set pricing targets.
Yes, for services, COGS is often called "Cost of Services" – direct labor, subcontractors, and materials directly tied to delivering the service.