Cost Of Goods Sold (COGS) Calculator Explained:
(a) What is this? COGS is the direct costs of a product. In retail, it tells you the price that the retailer pays for the products they sell.
(b) What does this tell me? What it costs to acquire a product. As an example, if you are selling a bottle of water, you will have had to buy the water from a manufacturer or wholesaler first. COGS refers to the price you paid for the bottle of water. As retailers don't often manufacture the things they sell, this is the cost price you pay the supplier/vendor/wholesaler. It excludes any labour costs the retailer might incur.
(c) Why should I use it? COGS is used to calculate margin and is thus one of the most important financial measures. It is used in all businesses to determine their margin or gross profit.
(d) Caution: Most POS systems have this number clearly detailed. However, this is a useful calculator as it will help confirm the accuracy of the POS system (or more accurately the data entered into the system). Higher or lower COGS is neither good or bad, it all depends on the situation that the business finds itself in. Seek the advice of your accountant in confirming the COGS for your business. You use this calculator at your own risk.