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How is COGS calculated?

Asked 3 years ago

Can someone please give me the formula for calculating the cost of goods sold along with an example? Thanks!

Abeeha Qasmi

Sunday, November 14, 2021

The following formula is used to calculate COGS:

COGS = Opening Inventory + Additional Purchases during the period – Closing Inventory

Suppose company QPR reported an opening inventory of $15,000 at the start of the year. During this period, they bought other goods worth $5000. As the year ended, their closing inventory was $6000. Therefore, the COGS will be $14,000 in this scenario. Additionally, you can record the level of goods sold using three ways: The Average Cost Method, FIFO, and LIFO.

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