# 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

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.

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

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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