What is the COGS formula?

COGS = Beginning Inventory + Purchases During the Period − Ending Inventory. This formula accounts for all inventory costs that were actually sold, excluding items still on hand.

What is included in COGS?

COGS includes the direct costs of producing or purchasing the goods sold: raw materials, direct labor, manufacturing overhead, and freight-in. It excludes operating expenses like marketing, salaries of non-production staff, and rent.

How is gross profit different from net profit?

Gross profit is Revenue minus COGS. Net profit also subtracts operating expenses, interest, and taxes. Gross profit shows product-level profitability before overhead.

What is a good gross margin?

It varies widely by industry. Retail often runs 20–50%, software 60–80%, and restaurants 60–70% on food alone. Compare your margin to industry benchmarks rather than a single universal target.

What if my ending inventory is higher than beginning inventory plus purchases?

That would produce a negative COGS, which signals a data entry error. Ending inventory cannot exceed beginning inventory plus new purchases. Double-check your figures.

Can I use this for services?

Yes. Service businesses use a similar concept called Cost of Revenue or Cost of Services, which includes direct labor and subcontractor costs. The same formula applies.

COGS Calculator

Name: COGS Calculator
Availability: InStock
Author: Nham Vu

Enter beginning inventory, purchases, and ending inventory to calculate COGS, gross profit, and gross margin instantly.

Inventory & Cost Inputs

Currency Symbol

Beginning Inventory (start of period)

Purchases / Production Cost (during period)

Ending Inventory (end of period)

Revenue (optional — for gross margin)

Cost of Goods Sold (COGS)

—

Gross Profit

—

Revenue − COGS

Gross Margin

—

Gross Profit ÷ Revenue

Item	Amount
Beginning Inventory	—
+ Purchases / Production Cost	—
− Ending Inventory	—
= COGS	—
Revenue	—
Gross Profit	—
Gross Margin	—

Summary

Enter beginning inventory, purchases, and ending inventory to calculate COGS, gross profit, and gross margin instantly.

How it works

Enter the value of inventory you had at the start of the period.
Enter the total cost of goods purchased or produced during the period.
Enter the value of inventory remaining at the end of the period.
Optionally enter your total revenue to see gross profit and gross margin.
Results update instantly as you type.

Use cases

Calculate COGS for monthly, quarterly, or annual income statements.
Determine gross profit for a product line or entire store.
Estimate gross margin percentage to benchmark against industry standards.
Compare COGS across periods to spot inventory inefficiencies.
Prepare financial reports for investors or lenders.
Verify accounting entries during an audit.

Frequently Asked Questions

Last updated: 2026-07-01 · Reviewed by Nham Vu