Cost Of Goods Sold

Definition

COGS. An income statement figure which reflects the cost of obtaining raw materials and producing finished goods that are sold to consumers. Cost of Goods Sold = Beginning Merchandise Inventory + Net Purchases of Merchandise - Ending Merchandise Inventory.

For example:
Beginning Merchandise Inventory = $150,000
Net Purchases of Merchandise = $400,000
Ending Merchandise Inventory = $125,000
COGS = 150,000 + 400,000 - 125,000 = $425,000.

In standard accounting practices, gross margin can be calculated by subtracting the cost of goods sold from total sales.

Use Cost Of Goods Sold in a sentence

I had to determine the cost of goods sold, which could take a pretty long time and a lot of stressful work.

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You need to make sure that you are getting the most out of your cost of goods sold at all times to increase profits.

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My boss asked me to take the amount of money we spent on raw materials and production of our product to calculate our overall cost of goods sold.

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