Frequently Asked Questions
What is the best method to calculate COGS?
The best method for calculating COGS is to use an automated, online calculator (like the one from Skubana). When using a COGS calculator, you can simply input your beginning and ending inventory, plus whatever you spent on purchases during that period of time. Then, within just a click or two, you’ll have all your COGS data right at your fingertips.
Where is cost of goods sold (COGS) on an income statement?
Cost of goods sold appears on a company’s income statement, right below the revenue line. In general, the higher your COGS, the lower your gross profit — which means COGS is an important metric to pay attention to within your greater inventory management strategy.
Is COGS the same as expenses?
Although it’s a common misconception, COGS is not the same as expenses. COGS relates to the direct costs of producing the goods sold by your business (raw materials, labor), whereas expenses are what’s invested to run your business (rent, advertising spend).
What is not included in the COGS calculation?
Cost of goods sold does not include the indirect fees for things like overhead, marketing, or distribution costs. Instead, those items are classified as expenses — i.e. the money you invest in running your business day-to-day, as opposed to what you spend on production.