Cost of goods sold (COGS)

Definition in practice

The simplified kitchen formula is a management calculation. Your accountant may classify packaging, production labor and other costs differently for financial statements. Keep a written mapping between the operating report and the accounts so a change in classification is not mistaken for a change in kitchen performance.

Formula and worked example

Food usage = opening inventory + received purchases − closing inventory, adjusted for transfers and credits.

Assume opening food inventory is $4,000, received purchases are $12,000 and closing inventory is $3,500. Before other adjustments, usage is $12,500. Paying a supplier invoice later does not change when the food arrived. Likewise, buying stock that remains on the shelf is different from consuming it.

Use it in the kitchen

Count stock at consistent cutoffs and use a consistent valuation method. Include prepared food still on hand when it is material to the result, and avoid counting both its raw ingredients and the finished batch. Reconcile deliveries received around the cutoff so purchases and physical stock land in the same period.

Keep the input record

Write the unit, period and preparation beside the figure you use. Keep the original receipt, count or recipe record available so another person can reproduce the calculation. A clearly labeled assumption is useful for planning; it should not later be mistaken for a measured result.

Use the linked calculator to test your own inputs, then check the result against the original record. The browser ledger can hold recipe quantities and purchase prices, while your stock and accounting records provide the wider operating context. Export a backup before replacing a working ledger.