COGS – Cost of Goods Sold
The Cost of Goods, also known as COGS or Cost of Sales, is the actual cost of the commodities sold to customers. It involves both cost of the material used for production and direct labor cost. The cost of goods sold (COGS) is shown in profit and loss account.
- Raw material, Storage, Freight or Shipping Charges.
- Factory Overheads.
- Direct Labor Cost.
How to Calculate the Cost of Goods Sold (COGS)?
COGS = Opening Stock + Purchases – Closing Stock
Also, COGS = Net Sales – Gross Profit
Opening Stock of a business is valued at = 25,00,000
Purchases = 10,00,000
Closing Stock valued at = 15,00,000
COGS = OS + P – CS
= 25,00,000 + 10,00,000 – 15,00,000
Net Sales = 20,00,000
Gross Profit = 10,00,000
COGS = Net Sales – GP
= 20,00,000 – 10,00,000