Cost of goods sold (COGS) calculation formula is a measure for businesses to determine the total cost associated with their goods that were sold during a certain period. The formula itself is rather straightforward: COGS = Beginning Inventory + Purchases – Ending Inventory. This method allows businesses to keep track of how much they are spending on production and materials while also ensuring they maintain a healthy profit margin. By knowing their costs, businesses can make informed decisions when it comes to pricing, managing inventory, and marketing their products. Ultimately, this will help them expand their customer base and maximize profits.