Cost of good sold, or COGS is the price you paid to acquire the products that you’ll sell to your customers in retail/wholesale businesses, or the cost of the raw materials, labour and supplies in manufacturing businesses.
It’s important to know your cost of goods sold so that you can better understand your business – your profits, and where you might be able to improve efficiencies.
How to calculate cost of goods sold
Most small businesses use the following formula to calculate their COGS expense:
Value of goods inventory at the beginning of the period
Value of any goods purchased for resale during the period
Value of goods inventory at the end of the period
The cost of goods sold during the period
And there you have it! Calculating your cost of goods sold is another tool you can use to help your small business succeed.