Cost of Goods Sold (COGS) Calculator
From beginning inventory, purchases and ending inventory, compute COGS and the gross profit and margin.
Input Data
Results
At a glance:COGS = beginning inventory + purchases - ending inventory. It is the direct cost of goods actually sold — only costs you can trace to the product (materials, direct labour, freight-in, packaging); selling, admin and overhead are excluded. Then gross profit = revenue - COGS; gross margin = gross profit / revenue. Example: begin 50k + buy 200k - end 30k = COGS 220k. The inventory method (FIFO, weighted average, specific ID) changes COGS when prices move. WARNING: A wrong count distorts COGS, gross profit and tax. COGS is a deductible expense in computing Hong Kong Profits Tax. Education, not advice.
Formula
COGS = beginning inventory + purchases − ending inventory.
Gross profit = revenue − COGS.
How to Use
- Enter beginning inventory, purchases and ending inventory.
- Optionally enter revenue to see gross profit and margin.
- View the COGS, gross profit and gross margin.
FAQ
What costs are included in COGS?
Only direct, traceable-to-product costs: raw materials, direct labour to make/source the goods, inbound freight, and packaging. Selling, marketing, admin salaries, rent and depreciation are operating expenses, not COGS, and are taken below gross profit.
Why does ending inventory matter so much?
COGS = beginning + purchases - ending. A higher ending inventory means fewer goods counted as 'sold', so lower COGS and higher gross profit (and tax); a lower ending inventory does the opposite. So inventory accuracy directly drives reported profit and tax — a common audit focus.
How does the inventory method affect COGS?
When purchase prices change, FIFO (oldest costs first) and weighted average give different COGS. In rising prices, FIFO shows lower COGS and higher profit (more tax now); weighted average smooths it. The method must be consistent and is a key accounting choice.
Is COGS deductible for Hong Kong Profits Tax?
Yes. In computing assessable profits, the costs of goods sold (and other wholly and exclusively incurred business expenses) are generally deductible. Proper inventory records support the deduction. For specifics, follow the Inland Revenue Department and consult an accountant.
Gross profit vs gross margin — which to watch?
Gross profit is the absolute amount; gross margin is the percentage (gross profit / revenue), better for comparing across periods or with peers. A falling margin signals rising direct costs or weak pricing even if the profit figure looks fine. Track both.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.