Calculate cost of goods sold and inventory turnover
Enter beginning and ending inventory and purchases; the calculator works out cost of goods sold, average inventory, turnover and days in inventory.
Cost of goods sold is the cost of the goods actually sold during the period, not everything the business bought. Other figures a trader relies on follow from it: gross profit, inventory turnover, and the number of days goods sit in the warehouse before they sell.
The COGS calculator puts those figures on one screen: enter your inventory and purchases and it shows cost of goods sold, average inventory, inventory turnover and days in inventory, plus gross profit and gross margin if you enter sales. For the term itself, see cost of goods sold in the Qoyod glossary.
What is the COGS and inventory turnover calculator?
A free tool that applies the cost of goods sold formula under a periodic inventory system, then works out inventory turnover and days in inventory from it. It updates instantly with no submit button and takes a full year, a quarter or a month by changing the days in the period.
How is cost of goods sold calculated?
To calculate cost of goods sold, add up what was available for sale during the period, then subtract what was left in the warehouse at the end:
- Goods available for sale: beginning inventory + purchases + freight-in − purchase returns, allowances and discounts.
- Cost of goods sold: goods available for sale − ending inventory.
Example: a shop starts the year with inventory worth 120,000, buys goods for 480,000, pays 20,000 freight-in, returns 10,000 of goods to suppliers, and counts 150,000 of inventory at year-end. Goods available for sale are 120,000 + 480,000 + 20,000 − 10,000 = 610,000, and cost of goods sold is 610,000 − 150,000 = 460,000.
The formula assumes a periodic inventory system. Under a perpetual system the cost is recorded at each sale. In Qoyod, the cost of a stocked product is recorded to cost of goods sold on sale using the average cost method, explained under weighted average cost method.
How are inventory turnover and days in inventory calculated?
- Average inventory: (beginning inventory + ending inventory) ÷ 2.
- Inventory turnover: cost of goods sold ÷ average inventory.
- Days in inventory: days in the period ÷ turnover.
In the example, average inventory is (120,000 + 150,000) ÷ 2 = 135,000, turnover is 460,000 ÷ 135,000 = about 3.41 times, and days in inventory are 365 ÷ 3.41 = about 107 days. In other words, goods sit in the warehouse for about 107 days before they sell.
The calculator uses 365 days unless you change it; for a quarter, enter 90. For more detail, see inventory turnover and days inventory outstanding.
There is no single right turnover rate for every business. Compare your result with your own past periods; a reasonable rate varies by activity.
Gross profit and gross margin
If you enter net sales excluding VAT, the calculator works out gross profit, which is net sales minus cost of goods sold, and gross margin, which is gross profit divided by net sales. With sales of 800,000 in the example, gross profit is 340,000 and the margin is 42.5%. For the margin on a single product's price, use the profit margin calculator.
What the calculator leaves out
- Perpetual inventory: the calculator applies the periodic formula to the period's balances; it does not track the cost of each sale.
- Manufacturing cost: manufacturers have other cost items in inventory value; the calculator deals with goods bought for resale.
- VAT: enter purchases and sales excluding VAT.
Cost of goods sold in Qoyod
In Qoyod, the total cost of goods sold appears in the income statement, and the product cost and margin report shows the average cost and margin for each product and location. You can set a reorder point for each product so an alert appears on the dashboard when stock reaches it. If you prefer a sheet that keeps the calculation for several periods, download the COGS template.
Why use the Qoyod COGS calculator
- Four figures on one screen: cost of goods sold, average inventory, turnover and days in inventory.
- Freight and returns: separate fields to adjust purchases.
- Any period: a year, a quarter or a month by changing the days.
- A flag on bad figures: when ending inventory exceeds the goods available for sale.
Got questions?
Straight answers to what traders and accountants ask about COGS and inventory turnover.
What is the formula for cost of goods sold?
Cost of goods sold is beginning inventory plus purchases and freight-in, minus purchase returns, allowances and discounts and ending inventory. That is the periodic inventory formula.
How is inventory turnover calculated?
Divide cost of goods sold by average inventory, where average inventory is beginning plus ending inventory divided by 2. With costs of 460,000 and an average of 135,000, turnover is about 3.41 times.
How do I calculate days in inventory?
Divide the days in the period by the turnover. The calculator uses 365 days unless you change it; for figures covering a quarter, enter 90.
What is a good inventory turnover?
There is no single right rate for every business; the type of goods and how they sell change it. Compare your result with your own past periods; a reasonable rate varies by activity.
Does VAT go into cost of goods sold?
Enter purchases and sales excluding VAT; the calculator works out the cost of goods and gross profit on amounts before tax.
How does Qoyod calculate cost of goods sold?
In Qoyod, the cost of a stocked product is recorded to cost of goods sold on sale using the average cost method, and the total appears in the income statement.