Want to know if your inventory-based business is turning a profit? You need to determine your cost of goods sold, or COGS. Calculating your cost of goods sold tells you how much it costs to create a product—so if you know your COGS, you know what price to sell your goods at to turn a profit.
If you're ready to dive right in, here's the COGS formula:
Cost of goods sold = beginning inventory + purchases – ending inventory
Of course, rather like the pure and simple truth, easy mathematical equations are rarely easy and never simple. Keep reading for our breakdown of each part of the COGS formula.