Cost of Goods Sold Calculator

Use the formula: COGS = Beginning Inventory + Purchases − Ending Inventory. Take the dollar value of stock you had at the start of the period, add what you bought during the period (including freight-in), then subtract what is left at the end. The difference is your cost of goods sold.

COGS is the cost of inventory you actually sold — it varies with sales volume. Operating expenses (marketing, rent, salaries, software) are the overhead costs of running the business and are largely fixed. On an income statement, COGS is subtracted from revenue to get gross profit, then operating expenses are subtracted to get operating profit.

Service businesses often use the term "Cost of Services" or "Cost of Revenue" instead of COGS, since they have no physical inventory. The concept is the same: direct costs of delivering the service (contractor labor, billable hours, materials consumed). Pure consulting firms with no materials may have minimal cost of revenue.

Yes — and when it is, you have a gross loss. This means you are selling inventory for less than it costs you, before even covering overhead. Common causes are aggressive discounting, supplier price increases not passed through, or significant inventory shrinkage. A persistent gross loss is unsustainable; revisit pricing, supplier costs, or product mix.