Cost of Goods Sold (COGS) Calculator: Profit & Margin

What does a COGS of $24,000.00 mean?

It means the goods you sold cost you $24,000.00 to buy or make — $8,000.00 of stock you already had, plus $22,000.00 of stock you bought, minus $6,000.00 of stock still on the shelf. You sold those goods for $50,000.00, so $26,000.00 stayed in the business after the goods were paid for, and the gross margin is 52.00%: for every $100 of sales, $48.00 paid for the goods and $52.00 stayed. The COGS, the profit and the margin are three outputs, never the same number — the COGS is what the goods cost, the profit is what is left, and the margin is the share of every sales dollar that is left.

Three things to check before you trust the number

The revenue does not change the COGS. At $60,000 of revenue the COGS is still $24,000.00 and the margin is 60.00%, and at $40,000 it is still $24,000.00 and the margin is 40.00%. The revenue is what you sold the goods for, not what they cost — if changing the revenue changes your COGS, the formula is wrong.

The ending inventory is the lever that moves the COGS. $12,000 of ending inventory instead of $6,000 drops the COGS to $18,000.00 and lifts the margin to 64.00%, and $0 of ending inventory lifts it to $30,000.00 and cuts the margin to 40.00%. Count the stock at the end of the period carefully — a wrong count moves the profit by the same amount, in the opposite direction.

A negative COGS means the count is wrong. $35,000 of ending inventory gives a COGS of −$5,000.00 and a margin of 110.00%: you cannot have more stock left than you started with plus what you bought. Check the count before you trust the profit.

Worked example

On the defaults: revenue $50,000.00; beginning inventory $8,000.00; purchases $22,000.00; ending inventory $6,000.00.

1. Cost of goods sold: $8,000.00 + $22,000.00 − $6,000.00 = $24,000.00.
2. Gross profit: $50,000.00 − $24,000.00 = $26,000.00.
3. Gross margin: $26,000.00 ÷ $50,000.00 × 100 = 52.00%.
4. Verdict: the margin sits at or above 50%.
5. Smallest revenue for a 50% margin: $48,000 — at $48,000 the margin is 50.00% (unrounded 50.000000%), and at $47,999 it is 49.998958%.
6. Largest ending inventory for a $20,000 COGS: $10,000 — at $10,000 the COGS is $20,000.00, and at $10,001 it is $19,999.00.
7. Smallest purchases for a $25,000 COGS: $23,000 — at $23,000 the COGS is $25,000.00, and at $22,999 it is $24,999.00.

Every branch, checked

• Revenue $60,000: Revenue $60,000: COGS $24,000.00; gross profit $36,000.00; gross margin 60.00%. More sales at the same cost, so a higher margin.
• Revenue $40,000: Revenue $40,000: COGS $24,000.00; gross profit $16,000.00; gross margin 40.00%. Fewer sales at the same cost, so a lower margin.
• Beginning inventory $12,000: Beginning inventory $12,000: COGS $28,000.00; gross profit $22,000.00; gross margin 44.00%. More stock on hand at the start, so a higher COGS and a lower margin.
• Beginning inventory $4,000: Beginning inventory $4,000: COGS $20,000.00; gross profit $30,000.00; gross margin 60.00%. Less stock on hand at the start, so a lower COGS and a higher margin.
• Purchases $30,000: Purchases $30,000: COGS $32,000.00; gross profit $18,000.00; gross margin 36.00%. More bought during the period, so a higher COGS and a lower margin.
• Purchases $15,000: Purchases $15,000: COGS $17,000.00; gross profit $33,000.00; gross margin 66.00%. Less bought during the period, so a lower COGS and a higher margin.
• Ending inventory $12,000: Ending inventory $12,000: COGS $18,000.00; gross profit $32,000.00; gross margin 64.00%. More stock left at the end, so a lower COGS and a higher margin.
• Ending inventory $0: Ending inventory $0: COGS $30,000.00; gross profit $20,000.00; gross margin 40.00%. Nothing left at the end, so a higher COGS and a lower margin.
• Revenue $75,000: Revenue $75,000: COGS $24,000.00; gross profit $51,000.00; gross margin 68.00%. Much more sales at the same cost, so the highest margin of the branches.
• Revenue $30,000: Revenue $30,000: COGS $24,000.00; gross profit $6,000.00; gross margin 20.00%. Much fewer sales at the same cost, so the lowest margin of the branches.

The reverses, worked backwards

• Smallest revenue for the margin to STAY at or above 50%: $48,000 — at $48,000 the figures are COGS $24,000.00; gross profit $24,000.00; gross margin 50.00% (unrounded 50.000000%); at the lower neighbor the figures are COGS $24,000.00; gross profit $23,999.00; gross margin 50.00% (unrounded 49.998958%); at the upper neighbor the figures are COGS $24,000.00; gross profit $24,001.00; gross margin 50.00% (unrounded 50.001042%) — verdict: STEP.
• Largest ending inventory for the COGS to STAY at or above $20,000: $10,000 — at $10,000 the figures are COGS $20,000.00; gross profit $30,000.00; gross margin 60.00% (unrounded 60.000000%); at the lower neighbor the figures are COGS $20,001.00; gross profit $29,999.00; gross margin 60.00% (unrounded 59.998000%); at the upper neighbor the figures are COGS $19,999.00; gross profit $30,001.00; gross margin 60.00% (unrounded 60.002000%) — verdict: STEP.
• Smallest purchases for the COGS to STAY at or above $25,000: $23,000 — at $23,000 the figures are COGS $25,000.00; gross profit $25,000.00; gross margin 50.00% (unrounded 50.000000%); at the lower neighbor the figures are COGS $24,999.00; gross profit $25,001.00; gross margin 50.00% (unrounded 50.002000%); at the upper neighbor the figures are COGS $25,001.00; gross profit $24,999.00; gross margin 50.00% (unrounded 49.998000%) — verdict: STEP.
• Largest beginning inventory for the profit to STAY at or above $25,000: $9,000 — at $9,000 the figures are COGS $25,000.00; gross profit $25,000.00; gross margin 50.00% (unrounded 50.000000%); at the lower neighbor the figures are COGS $24,999.00; gross profit $25,001.00; gross margin 50.00% (unrounded 50.002000%); at the upper neighbor the figures are COGS $25,001.00; gross profit $24,999.00; gross margin 50.00% (unrounded 49.998000%) — verdict: STEP.
• Smallest revenue for the profit to STAY at or above $30,000: $54,000 — at $54,000 the figures are COGS $24,000.00; gross profit $30,000.00; gross margin 55.56% (unrounded 55.555556%); at the lower neighbor the figures are COGS $24,000.00; gross profit $29,999.00; gross margin 55.55% (unrounded 55.554732%); at the upper neighbor the figures are COGS $24,000.00; gross profit $30,001.00; gross margin 55.56% (unrounded 55.556379%) — verdict: STEP.
• Largest purchases for the margin to STAY at or above 50%: $23,000 — at $23,000 the figures are COGS $25,000.00; gross profit $25,000.00; gross margin 50.00% (unrounded 50.000000%); at the lower neighbor the figures are COGS $24,999.00; gross profit $25,001.00; gross margin 50.00% (unrounded 50.002000%); at the upper neighbor the figures are COGS $25,001.00; gross profit $24,999.00; gross margin 50.00% (unrounded 49.998000%) — verdict: STEP.

What the defaults assume

The defaults are one small business with $50,000 of revenue, $8,000 of beginning inventory, $22,000 of purchases and $6,000 of ending inventory. They are a starting point, not a benchmark: a grocery shop and a software reseller have very different margins, and the right margin for your business is the one that covers your overhead and leaves a profit. Change the four numbers to your own and the calculator recomputes instantly.

These notes repeat in every explainer section because this page is built to be read start to finish: the defaults are one business’s numbers, not a standard; the COGS does not move with the revenue; the ending inventory is the lever; and a negative COGS means the count is wrong.

Output · formula · meaning

Who uses this

• A shop owner who counts stock at month end and wants to know what the month’s sales actually cost.
• A small manufacturer who tracks raw materials and finished goods and needs the COGS for the tax return.
• A reseller who buys and sells and wants the margin on each line before setting prices.
• A bookkeeper who checks a client’s inventory figures against the profit the client claims.

Accuracy & limitations

The calculator does the arithmetic exactly — the COGS is beginning inventory plus purchases minus ending inventory, the profit is revenue minus COGS, and the margin is profit divided by revenue — and every figure on this page is checked against an independent model. What it cannot do is count your stock for you: a wrong inventory count moves the profit by the same amount, and a negative COGS always means the count is wrong. It also treats all purchases as goods for sale — overhead, wages and rent are not in the COGS, they come out of the gross profit. And the margin is undefined when the revenue is $0: with no sales there is nothing to measure a margin against, and the calculator says so plainly rather than printing a number.

Cite this calculator

Cost of goods sold = beginning inventory + purchases − ending inventory; gross profit = revenue − cost of goods sold; gross margin = gross profit ÷ revenue × 100. On the defaults — revenue $50,000.00, beginning inventory $8,000.00, purchases $22,000.00, ending inventory $6,000.00 — the COGS is $24,000.00, the gross profit is $26,000.00 and the margin is 52.00%. Smallest revenue for a 50% margin: $48,000. Largest ending inventory for a $20,000 COGS: $10,000. Smallest purchases for a $25,000 COGS: $23,000. Largest beginning inventory for a $25,000 profit: $9,000. Smallest revenue for a $30,000 profit: $54,000. Largest purchases for a 50% margin: $23,000. Source: Bright Side Kit, brightoolbox.com.

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