Cost of Goods Sold or COGS is the costs that go into creating the products that any company sell. The only costs included in the measure are those that are directly tied to the production of the products. For example, the COGS for a television set would include the material costs for the parts that go into making that television along with the labor costs used to put that television set together. The cost of sending those televisions to buyers and the cost of the labor used to sell it would be excluded. That is the example of the basic interpretation of COGS. The accounts included in the COGS calculation will differ based on company’s type of business.
Based on accounting rules and inventory valuation method, COGS can be calculated using one of three cost flows :
1. First In, First Out (FIFO), items purchased first are sold first.
2. Last In, First Out (LIFO), items purchased last are sold first.
3. Average
Note that these are cost flow assumptions. This means that the order in which costs are removed from inventory can be different from the order in which the goods are physically removed from inventory. There several factors that can affect the choice of cost flow, and depend on your company policy.
This is a simple COGS calculator that suitable for companies that run retail business with fast moving item. Use this tool with steps as follows :
1. Type in your company month period
2. Type in your company beginning inventory unit and price
3. Type in your company sold unit
4. Start type in regularly your company net purchases including unit and price information within that period
Ending inventory will be calculated automatically with following formula :
- Ending Inventory = Beginning Inventory + Net Purchases – COGS
So, everytime you put your net purchases inside the table, the COGS will be adjusted automatically.
