# How to Calculate Cost of Goods Sold?

How do you calculate the cost of goods sold (cogs)?

## COGS Calculation

COGS - Cost Of Goods Sold is an income statement. The statement reflects the amount of money used for obtaining the raw materials for the production of goods to be sold to the consumers. The amount includes the labor costs towards the production of goods. It excludes the indirect expenses such as distribution costs and sales force costs. COGS is determined to calculate the company's gross margin. The cost is also sometimes referred to as Cost of Sales. This short tutorial helps you in calculating the Cost of Goods Sold with a simple example. Let us learn here how to calculate cost of goods sold (COGS).
Formula:
Cost Of Goods Sold (COGS) = Beginning Inventory + Purchases - Ending Inventory Step 1: Let us consider an example were the values are given as follows,
Beginning Merchandise Inventory = Rs.1,75,000
Net Purchases of Merchandise = Rs.5,00,000
Ending Merchandise Inventory = Rs.1,30,000 Step 2: Applying the values in the COGS formula,
Cost Of Goods Sold (COGS) = Beginning Inventory + Purchases - Ending Inventory
COGS = 175,000 + 500,000 - 130,000
COGS = Rs. 545,000 Find Cost of Goods Sold using our simple online calculator.