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 costs of the material used for production and direct labour cost. The cost of goods sold (COGS) is shown in the income statement. Sales are either recorded in a company’s cash book or the sales book.
- 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 = 2,500,000
Purchases = 1,000,000, Closing Stock valued at = 1,500,000
COGS = OS + P – CS
= 2,500,000 + 1,000,000 – 1,500,000
Net Sales = 2,000,000, Gross Profit = 1,000,000
COGS = Net Sales – GP
= 2,000,000 – 1,000,000
Short Quiz for Self-Evaluation
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