# How To Calculate Cost Of Goods Sold

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## How To Calculate Cost Of Goods Sold

Calculating Cost Of Goods Sold: This video demonstrates a simple step-by-step formula for calculating cost of good sold.

Hi. My name is Grant Hobson. I have been a finance analyst for the last six years.

Today, I am going to run you through some financial performance methods, as well as some investment appraisal techniques. "How To Calculate Cost Of Goods Sold": The cost of goods sold, or COGS, is the direct cost attributable to production of the goods sold by a company. This does not include the cost of the materials used in creating the goods along with direct labor costs used to produce the goods.

It will exclude indirect expenses such as distribution costs and sales costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin. Pretend a company has three products: A,B and C, which sells one hundred units of A, fifty units of B, and two hundred and fifty units of C.

The raw material cost for these products, respectively, are seven pounds, ten pounds, and twelve pounds, which gives us a total raw material cost of four thousand two hundred pounds for their products. Along with this in the period, we have production costs associated with this of ten thousand pounds, as well as labor costs of six thousand pounds. Anyway, the total cost of goods sold is twenty thousand two hundred pounds.

To recap, pretend a company has three products: A,B and C, which sell one hundred units of A, fifty units of B, and two hundred and fifty units of C. The raw material costs for these products, respectively, seven pounds, ten pounds, and twelve pounds, which gives us a total raw material cost of four thousand two hundred pounds for their products. Along with this in the period, we have production costs associated with this of ten thousand pounds, as well as labor costs of six thousand pounds.

Anyway, a total cost of goods sold of twenty thousand two hundred pounds.