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TinyBizTools

COGS Calculator

Calculate your cost of goods sold, gross profit, and gross margin instantly. Free COGS calculator for small businesses — no signup required.

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Ready to calculate

Enter your inventory values and purchases to calculate your cost of goods sold.

How to Use This COGS Calculator

  1. Enter your beginning inventory — the total dollar value of inventory you had at the start of the accounting period.
  2. Enter your purchases — the total cost of inventory purchased or produced during the period.
  3. Enter your ending inventory — the dollar value of inventory remaining at the end of the period.
  4. Optionally enter revenue — to see your gross profit and gross margin percentage alongside your COGS.

The calculator auto-calculates as you type, so you will see your numbers update in real time.

The Formula

Cost of Goods Sold:

COGS = Beginning Inventory + Purchases - Ending Inventory

With Revenue (optional):

Gross Profit = Revenue - COGS
Gross Margin % = (Gross Profit / Revenue) × 100

Example: A retail shop has $10,000 in beginning inventory, purchases $5,000 in new stock during the quarter, and has $3,000 left at the end:

  • COGS = $10,000 + $5,000 - $3,000 = $12,000
  • If quarterly revenue was $20,000: Gross Profit = $20,000 - $12,000 = $8,000
  • Gross Margin = $8,000 / $20,000 = 40%

Understanding Your COGS Number

Your COGS figure tells you how much it actually costs to deliver the products you sell. A rising COGS relative to revenue means your margins are shrinking — time to negotiate with suppliers, optimize production, or adjust prices.

Here are typical COGS percentages by industry (as a percentage of revenue):

IndustryTypical COGS %Typical Gross Margin
Grocery / supermarket70–80%20–30%
Restaurant28–35%65–72%
Retail (general)50–65%35–50%
Manufacturing60–75%25–40%
E-commerce40–60%40–60%
Wholesale / distribution75–85%15–25%
Software / SaaS15–30%70–85%

If your COGS percentage is significantly higher than the industry average, look at your supplier costs, production efficiency, and inventory management practices.

Frequently Asked Questions

What is cost of goods sold (COGS)?
COGS represents the direct costs of producing or purchasing the goods your business sold during a specific period. It includes raw materials, direct labor, and manufacturing overhead — but not indirect expenses like rent, marketing, or administrative salaries.
COGS = Beginning Inventory + Purchases During Period - Ending Inventory. For example, if you start with $10,000 in inventory, purchase $5,000 more, and end with $3,000, your COGS is $12,000.
COGS directly affects your gross profit and gross margin, which are key indicators of business health. Tracking COGS helps you set prices, control costs, and make informed decisions about production and purchasing. It is also required for tax reporting.
COGS typically includes raw materials, direct labor costs, manufacturing overhead, freight and shipping for materials, and any costs directly tied to production. It does not include selling expenses, administrative costs, or rent on office space.
COGS covers the direct costs of producing goods (materials, direct labor). Operating expenses are indirect costs of running the business (rent, utilities, marketing, administrative salaries). Revenue minus COGS equals gross profit; gross profit minus operating expenses equals operating income.
Yes, COGS can be zero for service-based businesses that do not sell physical products. However, many service businesses still track direct costs (like subcontractor fees) as a form of COGS to calculate their gross margin accurately.

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