COGS Calculator: Calculate Your
Cost of Goods Sold
Use our free COGS calculator to instantly determine your Cost of Goods Sold, gross profit, and gross margin percentage.
COGS Calculator
Calculate your Cost of Goods Sold instantly
Input Values
Value of inventory at the start of the period
Total inventory purchased or produced
Value of inventory at the end of the period
Enter to calculate gross profit and margin
Results
Enter your inventory values
Results will appear here
Track COGS Automatically
StoreRadar tracks COGS automatically across your entire WooCommerce catalog, giving you real-time profitability insights.
What is COGS?
Understanding the costs that directly impact your product profitability
Cost of Goods Sold (COGS) represents the direct costs of producing or purchasing the products your business sells. It's one of the most important figures on your income statement because it directly determines your gross profit margin.
What COGS Includes
- • Raw materials and supplies
- • Direct labor costs (production workers)
- • Inbound shipping and freight
- • Manufacturing overhead
- • Purchase price of finished goods
What COGS Excludes
- • Marketing and advertising
- • Administrative salaries
- • Office rent and utilities
- • Outbound shipping to customers
- • Depreciation on non-production equipment
Understanding your COGS is essential because it directly affects your gross profit and, ultimately, your bottom line. A lower COGS means higher margins on each sale, while a higher COGS eats into your profitability. For ecommerce businesses, tracking COGS at the product level reveals which items are truly profitable and which are costing you money.
How to Find COGS in WooCommerce
Three ways to track Cost of Goods Sold in your WooCommerce store
Option 1: COGS Plugins
Install a WooCommerce COGS plugin to add cost fields to your products. Popular options include Cost of Goods for WooCommerce and WooCommerce Cost of Goods. These require manual cost entry for each product.
- Direct integration with WooCommerce
- Automatic calculation on orders
- Manual data entry required
- Limited reporting capabilities
Option 2: Manual Tracking
Track costs in a spreadsheet by exporting order data and manually matching with purchase costs. Suitable for low-volume stores but quickly becomes unmanageable.
- No additional software costs
- Full control over data
- Time-consuming
- Error-prone
- No real-time insights
Option 3: StoreRadar
Connect StoreRadar to your WooCommerce store for automated COGS tracking across your entire catalog. Import costs via CSV or sync from your inventory management system.
- Automated COGS calculation
- Product-level profitability
- Historical analysis
- Monthly subscription
How to Calculate COGS (Step-by-Step)
Follow these four steps to calculate your Cost of Goods Sold
Determine Beginning Inventory
Count and value all inventory you had at the start of the accounting period. This should match your ending inventory from the previous period.
Add All Purchases
Total up all inventory purchases made during the period, including raw materials, finished goods, and any freight-in costs.
Calculate Ending Inventory
Count and value all unsold inventory at the end of the period. Use the same valuation method (FIFO, LIFO, or weighted average) consistently.
Apply the COGS Formula
Subtract your ending inventory from the sum of beginning inventory and purchases to get your Cost of Goods Sold.
COGS vs Related Metrics
Understanding how COGS relates to other key financial metrics
| Metric | Definition | Formula | Example |
|---|---|---|---|
| COGS | Direct costs of producing goods sold | Beginning Inventory + Purchases - Ending Inventory | $27,000 |
| Gross Profit | Revenue minus COGS | Revenue - COGS | $23,000 |
| Gross Margin | Gross profit as a percentage of revenue | (Revenue - COGS) / Revenue × 100 | 46% |
| Operating Expenses | Indirect costs of running the business | Rent + Salaries + Marketing + Utilities + etc. | $15,000 |
| Net Profit | Profit after all expenses and taxes | Gross Profit - Operating Expenses - Taxes | $6,000 |
Why COGS Matters for Your Business
Four critical ways COGS impacts your ecommerce profitability
Pricing Decisions
Knowing your exact COGS helps you set prices that ensure profitability. Without accurate cost data, you might be pricing products below their true cost or leaving margin on the table.
Gross Margin Analysis
Track your gross margin over time and compare it to industry benchmarks. Healthy ecommerce gross margins typically range from 40-60%, though this varies by category. Jewelry and cosmetics often see 60-80%, while electronics may be 20-40%.
Inventory Management
COGS analysis reveals which products move fast and which sit on shelves. Use this data to optimize reorder points, reduce carrying costs, and avoid stockouts on high-margin items.
Tax Deductions
COGS is a legitimate tax deduction that reduces your taxable income. Accurate COGS tracking ensures you're claiming the full deduction you're entitled to, lowering your tax burden.
Common COGS Mistakes to Avoid
Four errors that distort your true cost of goods sold
Forgetting Shipping Costs
Inbound freight should be included in COGS. Many businesses incorrectly classify all shipping as an operating expense, understating their true cost of goods.
Inconsistent Inventory Valuation
Switching between FIFO, LIFO, or weighted average methods mid-year distorts your COGS. Pick a method and stick with it throughout the accounting period.
Including Non-Production Costs
Marketing, administrative salaries, and office rent are operating expenses, not COGS. Including them inflates your cost of goods and deflates gross margin.
Not Tracking by Product
Calculating COGS at the aggregate level masks which products are profitable and which are losing money. Product-level COGS reveals your true winners and losers.
Frequently Asked Questions
Common questions about Cost of Goods Sold
COGS stands for Cost of Goods Sold. It represents the direct costs associated with producing or purchasing the products that a company sells during a specific period. This includes raw materials, direct labor costs, and manufacturing overhead directly tied to production.
While often used interchangeably, there's a subtle difference. COGS specifically refers to the direct costs of producing goods for manufacturers and retailers. Cost of sales is a broader term that can include COGS plus other direct costs like shipping and sales commissions. For most ecommerce businesses, the terms are functionally equivalent.
Inbound shipping costs (freight-in) to get inventory to your warehouse are typically included in COGS. However, outbound shipping costs to customers are generally considered a selling expense and are not included in COGS. The treatment can vary based on your accounting method.
Most businesses calculate COGS monthly for management reporting and quarterly or annually for financial statements. Ecommerce businesses with high transaction volumes benefit from real-time COGS tracking to monitor profitability. StoreRadar calculates COGS automatically as orders come in.
COGS are direct costs tied to product production or purchase—they only occur when you make a sale. Operating expenses (like rent, marketing, and salaries) are indirect costs that occur regardless of sales volume. COGS is subtracted from revenue to get gross profit, while operating expenses are subtracted from gross profit to get operating income.
Technically, the COGS formula can produce a negative number if your ending inventory exceeds your beginning inventory plus purchases. However, this usually indicates an accounting error, such as unreported purchases or incorrect inventory counts. A negative COGS should be investigated rather than reported.
Track COGS Automatically in WooCommerce
Stop calculating COGS manually. StoreRadar tracks product costs in real-time so you always know your true profitability.
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