How to calculate your business’ cost of goods sold (COGS)

Cost of good sold (COGS) is an important figure to know. Cost of goods sold is the price that your business 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.

Why should you know your business’ cost of goods sold? It’s important to know 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.

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