Cost of goods sold is the total cost of the Item (merchandise) that was sold to customers.
Inventory are Items (merchandise) created (purchased) by manufacturers, retailers, wholesalers, or distributors for the purpose of being sold to customers.
Cost of Goods Example:
| Soap Beginning Inventory | 0 |
| Total Soaps Made in 2016 | 175 |
| Total Soap Making Supplies Purchased in 2016 | $1,500.00 |
| Total Cost | Total Inventory | Cost per Item |
| $1,500.00 | / 175 | = $8.57 |
The $8.57 is how much each Soap (Item) cost in raw materials to produce, otherwise known as the Cost of Goods (CoG)
How to Determine Profits and Net Sales:
Using the example above, we can pretend that data is for a single day or event’s sales.
| Cost Per Item | Total Inventory | Inventory Net Value |
| $8.57 | * 175 | = $1,499.75 |
Next we would want to calculate the potential sales at by setting a retail price.
| Retail Value (Item) | Cost Per Item | Net Profit (Item) |
| $10.00 | – $8.57 | = $1.43 |
Finally we can calculate the potential sales and gross retail value.
| Retail Value (Item) | Total Inventory | Gross Retail Value |
| $10.00 | * 175 | = $1,750.00 |
Calculate Profit & Loss for Total Sales:
| Total Sold (Item) | Retail Value (Item) | Gross Sales |
| 100 | * $10.00 | = $1,000.00 |
| Total Sold (Item) | Cost Per Item | Cost Of Goods |
| 100 | * $8.57 | = $857.00 |
| Gross Sales | Cost Of Goods | Net Profit |
| $1,000.00 | – $857.00 | = $143.00 |
Accounting for unpaid discounts / donated goods, try the following method:
| Total Inventory | Minus Total Sold | Minus Invtry Left | Unpaid Inventory |
| 175 | – 100 | – 70 | = 5 |
| Total Items | Cost Per Item | Total CoG |
| 100+5 (unpaid) =105 | * $8.57 | = $899.85 |
| Unpaid Items (CoG) | 5 * $8.57 = $ 42.85 | Discounts/Donated |
| Total Sold (Item) | Retail Value (Item) | Gross Sales |
| 100 | * $10.00 | = $1,000.00 |
| Gross Sales | Cost Of Goods | Net Profit |
| $1,000.00 | – $899.85 | = $100.15 |
Try using our Cost of Goods Calculator:
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