Unadjusted Cost of Goods Sold Calculator
This calculator determines the Unadjusted Cost of Goods Sold (COGS) based on your Beginning Inventory, Purchases, and Ending Inventory using the basic accounting formula.
Enter the values for your inventory at the beginning of the period, the total cost of goods purchased during the period, and your inventory at the end of the period.
Enter Inventory and Purchase Values
Understanding Unadjusted Cost of Goods Sold
What is Cost of Goods Sold (COGS)?
Cost of Goods Sold (COGS) represents the direct costs attributable to the production or purchase of the goods sold by a company during a particular period. This includes the cost of the materials used to create the goods and the direct labor costs incurred to produce them. For a retailer, it's primarily the cost they paid for the goods they sold.
Why Calculate COGS?
COGS is a crucial component in calculating a company's gross profit (Sales Revenue - COGS). It helps businesses understand how much it costs to sell their products and is a key figure on the income statement.
The Basic Unadjusted COGS Formula
The basic formula for calculating the unadjusted cost of goods sold is:
Beginning Inventory + Purchases - Ending Inventory = Unadjusted COGS
This formula makes intuitive sense: the goods you had at the start, plus the goods you bought, minus the goods you have left over, must be the goods you sold (or are otherwise no longer on hand, which is why it's "unadjusted").
Important Note: Unadjusted vs. Adjusted COGS
This calculator provides the *unadjusted* COGS. In real accounting practice, the result from this calculation is compared to a physical count of ending inventory. Any discrepancies (due to theft, damage, errors, etc.) require an adjustment to the inventory and COGS figures to arrive at the *adjusted* COGS.
Unadjusted COGS Examples
Click on an example to see the step-by-step calculation:
Example 1: Growing Retailer
Scenario: A small clothing store had inventory at the start of the year, bought more stock, and ended the year with a higher inventory value.
1. Known Values:
- Beginning Inventory: $10,000
- Purchases: $50,000
- Ending Inventory: $15,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $10,000 + $50,000 - $15,000
4. Result: COGS = $45,000
Conclusion: The unadjusted cost of goods sold for the year was $45,000.
Example 2: Startup with No Initial Inventory
Scenario: A new online store started trading with no inventory, made some initial purchases, and had some stock left at the end of the first quarter.
1. Known Values:
- Beginning Inventory: $0
- Purchases: $5,000
- Ending Inventory: $1,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $0 + $5,000 - $1,000
4. Result: COGS = $4,000
Conclusion: The unadjusted cost of goods sold for the quarter was $4,000.
Example 3: Business Selling All Stock
Scenario: A pop-up shop brought in stock, made purchases, and sold *all* their inventory by the end of the event.
1. Known Values:
- Beginning Inventory: $2,000
- Purchases: $3,000
- Ending Inventory: $0
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $2,000 + $3,000 - $0
4. Result: COGS = $5,000
Conclusion: The unadjusted cost of goods sold was $5,000, matching the total cost of goods available for sale.
Example 4: Stable Inventory Level
Scenario: A large distributor maintains a consistent inventory level despite high sales volume.
1. Known Values:
- Beginning Inventory: $500,000
- Purchases: $2,000,000
- Ending Inventory: $500,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $500,000 + $2,000,000 - $500,000
4. Result: COGS = $2,000,000
Conclusion: When inventory levels are stable, unadjusted COGS equals purchases.
Example 5: Decreasing Inventory
Scenario: A business is selling off old stock and making fewer purchases than goods sold.
1. Known Values:
- Beginning Inventory: $8,000
- Purchases: $3,000
- Ending Inventory: $4,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $8,000 + $3,000 - $4,000
4. Result: COGS = $7,000
Conclusion: COGS ($7,000) is higher than purchases ($3,000), reflecting that inventory decreased.
Example 6: High Ending Inventory
Scenario: A seasonal business stocked up heavily but had much of that inventory left at the end of the season.
1. Known Values:
- Beginning Inventory: $1,000
- Purchases: $20,000
- Ending Inventory: $16,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $1,000 + $20,000 - $16,000
4. Result: COGS = $5,000
Conclusion: A large portion of the goods purchased remain in inventory, resulting in a lower COGS relative to purchases.
Example 7: Service Business with Minimal Inventory
Scenario: A consultant sells occasional physical reports but primarily provides service. They have negligible inventory.
1. Known Values:
- Beginning Inventory: $50
- Purchases: $200
- Ending Inventory: $30
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $50 + $200 - $30
4. Result: COGS = $220
Conclusion: Even small inventory amounts contribute to COGS for businesses that sell *any* physical goods.
Example 8: High Value, Low Volume Sales
Scenario: A car dealership had a few cars at the start, bought several expensive ones, and sold some, leaving a few at the end.
1. Known Values:
- Beginning Inventory: $100,000
- Purchases: $800,000
- Ending Inventory: $150,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $100,000 + $800,000 - $150,000
4. Result: COGS = $750,000
Conclusion: The high value of goods results in a significant COGS figure.
Example 9: Manufacturing Raw Materials
Scenario: A small manufacturer calculates the cost of raw materials used.
1. Known Values:
- Beginning Raw Materials Inventory: $5,000
- Raw Material Purchases: $12,000
- Ending Raw Materials Inventory: $6,000
2. Formula: Cost of Materials Used = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: Cost of Materials Used = $5,000 + $12,000 - $6,000
4. Result: Cost of Materials Used = $11,000
Conclusion: This $11,000 is part of the total manufacturing cost which feeds into finished goods COGS, but the formula structure is the same.
Example 10: Inputs Leading to Zero COGS
Scenario: A business had inventory and made purchases but ended the period with *more* inventory than they started with plus purchased, implying no sales or inventory increase from other means (or an error in inputs).
Note: While mathematically possible in the formula, Ending Inventory should not exceed Goods Available for Sale (Beg Inv + Purchases) in a simple sales scenario. If it does, it usually indicates missing information (like production) or an error in inventory count/valuation. This calculator shows the mathematical result.
1. Known Values:
- Beginning Inventory: $1,000
- Purchases: $2,000
- Ending Inventory: $3,000
2. Formula: COGS = Beginning Inventory + Purchases - Ending Inventory
3. Calculation: COGS = $1,000 + $2,000 - $3,000
4. Result: COGS = $0
Conclusion: Mathematically, the COGS is zero. In a real business, this implies no goods were sold, or there was an inventory increase not accounted for by 'Purchases'.
Frequently Asked Questions about Unadjusted COGS
1. What does "Unadjusted" COGS mean?
It refers to the cost of goods sold calculated using the basic formula (Beginning Inventory + Purchases - Ending Inventory) *before* accounting for factors like inventory shrinkage (loss due to theft, damage, obsolescence) or errors found during a physical inventory count. The final, reported COGS is the "Adjusted" COGS.
2. What is included in "Purchases"?
Purchases typically include the cost of the goods themselves, plus any costs necessary to get them to your location and ready for sale, such as freight-in (shipping costs paid by the buyer) and import duties. Purchase returns and allowances are deducted from purchases.
3. What cost method does this calculator use?
This calculator uses the basic periodic inventory system formula. It assumes your Beginning Inventory and Ending Inventory values are already determined using an inventory cost flow method (like FIFO, LIFO, or Weighted Average) appropriate for your business.
4. Can Ending Inventory be higher than Beginning Inventory + Purchases?
Mathematically, the formula can result in a negative or zero COGS if Ending Inventory is equal to or greater than the sum of Beginning Inventory and Purchases. In a real business context focused purely on sales from available stock, this is usually not possible and would suggest an error in the input figures, possibly a missed inventory count or a failure to account for goods produced internally (in manufacturing).
5. Does COGS include operating expenses like rent or salaries?
No. COGS includes only the *direct* costs of the goods sold (e.g., material costs, direct labor in manufacturing, or the purchase cost for retailers). Operating expenses (like rent, utilities, marketing, administrative salaries) are separate and are accounted for below the gross profit line on the income statement.
6. What is "Goods Available for Sale"?
Goods Available for Sale is the sum of Beginning Inventory and Purchases (Beginning Inventory + Purchases). This represents the total cost of all inventory that was available to be sold during the period. According to the formula, Goods Available for Sale must equal COGS plus Ending Inventory.
7. Is this calculator suitable for manufacturing businesses?
For manufacturing, calculating COGS is more complex, involving raw materials, work-in-process, and finished goods inventory. This calculator's formula (Beg Inv + Purchases - End Inv) is directly applicable to calculating the Cost of *Finished Goods* Sold, where 'Purchases' would represent the Cost of Goods Manufactured during the period.
8. What happens if I enter negative numbers?
The calculator is designed to prevent negative inputs as inventory and purchase costs cannot be negative in a standard calculation. It will show an error if negative numbers are entered.
9. Why might Unadjusted COGS differ from Adjusted COGS?
The difference comes from adjustments needed after a physical inventory count. If the physical count of ending inventory is lower than the value calculated by the formula, the difference is often due to shrinkage (spoilage, theft, damage) and an adjustment is made to increase COGS and decrease inventory.
10. What if one of the inputs is zero?
The calculator can handle zero inputs. For example, a new business would have a Beginning Inventory of zero, or a business might have zero Purchases in a period if they only sold from existing stock. An Ending Inventory of zero means all goods available were sold.
