What is COGS (Cost of Goods Sold)?

COGS is the direct cost of products sold: purchase price + inbound shipping + duties. The landed cost is the number you actually need to know.

Formula

COGS = Beginning Inventory + Purchases - Ending Inventory

Example

If you started with $5,000 in inventory, purchased $3,000, and ended with $4,000 remaining, COGS = $5,000 + $3,000 - $4,000 = $4,000.

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Margyn automatically tracks COGS at the landed cost level for every product and calculates CM1/CM2 contribution margins.

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Related Terms

Gross Margin

Gross margin is the difference between revenue and COGS, as a percentage. With the median e-commerce net profit at 3%, this number determines viability.

FIFO (First In, First Out)

FIFO is an inventory valuation method that costs the oldest purchased products first. Yet most e-commerce accountants recommend Weighted Average Cost (WAC) instead.

Contribution Margin

Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.

Net Margin

Net margin is the profit percentage remaining after all costs (COGS, ads, shipping, operations). The e-commerce median is just 3% — every percentage point matters.

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What is COGS (Cost of Goods Sold)? | Margyn Glossary