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How to calculate the cost of goods sold

Cost of goods sold often also abbreviated as COGS. Usually the definition of COGS related to all sales of products that have offered. Of course there are calculations that applied to get ideal results. Calculation of basic prices like this usually involves several important elements. Some of the calculation methods used are usually quite easy or complicated. This condition should do to determine the ideal calculation in accordance with the value of goods that have sold. The more elements that owned by the goods, of course, considered to have complexity. This concept also often applied from how to calculate the cost of goods sold.

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How to calculate the cost of goods sold by the ideal method

Usually the detail of how to calculate the cost of goods sold will involve tax elements. Your profits and income of course reduced according to the application of several important elements. All details applied also have a major influence on all calculations needed. The formula for the calculation applied will usually supported by a very easy method. Of course the equation of the components used must also look ideal with each other. This concept applied by many accountants by calculating all values ​​from the initial amount and inventory at a certain time. You should apply inventory to all calculated goods. Some steps from how to calculate the cost of goods sold can apply such as:

  1. Calculate the basic components of COGS

One of the methods used on how to calculate the cost of goods sold will indeed involve many basic components. Each of the details used in these basic components usually adjusted to all the required calculation parts. The more elements of course will have an effect on the results of goods. Components that often used for this calculation usually consist of initial inventory, additional inventory, reducing ending inventory and getting all results. Calculations like this of course will involve the entire inventory that owned by reducing the amount of ending inventory in a certain time. The calculation of the time used should not be too long.

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  1. Determine the direct costs applied

There are several components and other elements that will also affect the cost of goods. This will also relate to the direct costs applied to every detail for goods. Direct costs are all costs related to the sale of the goods within a specified time. Some details of the calculation of direct costs will usually involve the costs of buying resale goods, raw material costs to packaging costs. For some goods that require production in a certain period of time it will usually involve production costs. Of course this production cost also adjusted to all the supplies used.


  1. Calculate all indirect costs

Other details of how to calculate the cost of goods sold will use indirect costs. Calculation of indirect costs such as this will also involve all costs for facilities, labor and equipment used for goods. The more facilities used, of course, will have an effect on the results of the calculation of indirect costs. Some components that are often the main calculation for indirect costs consist of costs for labor which directly related to goods. In addition, there are elements of all equipment used for the production, packaging and shipping processes. Of course this fee will also involve salary calculations that applied to administrators or jobs that not related to the production process.

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  1. Involving all facilities used

Facilities become an important part of the production process for a certain period of time. The more goods needed, of course, the production process will also involve many facilities. Calculations from the use of facilities like this are also included in the element for calculating COGS. Usually some facilities will require the calculation of the appropriate percentage of costs used. The use of detailed elements will also applied to owned and leased facilities. In addition, the calculation of taxes from each facility use will also produce different calculations.


  1. Determine the initial inventory of goods

You also have to use an initial inventory calculation of all goods to sold and offered. Usually the initial inventory like this will consist of all goods, raw materials and materials that are still part of the production process. The calculation applied from this initial inventory should have the same details as the ending inventory. This component will indeed be an important calculation of all other elements that will affect differences. You also have to provide an explanation of the difference in inventory held last year with the beginning of the year.


  1. Add purchases for all inventories

Other calculations still an important part of course by adding all purchases from inventory. The time detail that will use for this inventory calculation is of course reaching 1 year. Usually purchases from inventory will also affect production costs which adjusted to all conditions. The greater the amount of production that will need, of course, will involve considerable inventory. This makes all parts of the calculation ideal. Purchases from inventory should require all invoices to calculate in the same pattern. This invoice will also be part of an important document.

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  1. Calculating the ending inventory of goods

The final inventory of goods owned becomes an element that usually affects the amount. Inventories like this will involve the physicality of goods originating from storage in certain facilities. Usually this final inventory will have a calculation of goods that can still use or not at all. Destruction for final supplies that cannot use should carry out. This is to reduce additional costs which are the process of storing or producing costs of new goods. Evidence of reduction in goods that are not used will also affect all values ​​of inventories.


  1. Applying calculations from COGS is ideal

For the final stage like this you will involve all the elements and components needed. You should use all of these elements with calculations that have different details. In addition, the calculation of each component also applied using a method that must adjusted to the needs. Returns from this initial business will also involve calculating all taxes that have given. You can use certain spreadsheets that facilitate the calculation of each component. However, try using accountant services that provide the best results with details of that element. The calculation results from accountants can of course be trusted.


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