Shopify is a platform for businesses of all sizes to create an online store. It offers users a customizable platform, an easy-to-use checkout process, and a wide range of features. One of the most important features for businesses is the ability to track inventory and calculate the cost of goods sold (COGS).
Inventory management is a crucial part of any business, but it can be especially challenging for businesses that sell physical goods. Keeping track of what inventory you have on hand, what needs to be reordered, and how much it all costs can be time-consuming and complex. Shopify makes it easy to manage your inventory and calculate your COGS with its built-in inventory management system.
When you add a product to your Shopify store, you’ll enter information about the product, including the name, price, SKU, and weight. You’ll also assign the product to a product type.
Product types help you organize your products and can be used to filter your products in the Shopify admin. For example, you might have a product type for “T-shirts” and another for “Hats. ”
You can also add variants to your products. Variants are different versions of a product that come in different sizes, colors, or styles. For example, if you sell T-shirts, you might have a variant for each size (small, medium, large) and each color (red, blue, green).
When you add variants to a product, you’ll need to specify the price and weight for each variant. You can also specify whether the variant is in stock or out of stock.
The cost of goods sold (COGS) is an important metric for businesses that sell physical goods. COGS includes the cost of the inventory that was sold plus the cost of any shipping or handling fees. COGS does not include any other expenses such as rent or marketing.
To calculate your COGS, simply multiply the number of units sold by the average cost per unit. The average cost per unit is calculated by adding together the total cost of all the units in inventory and dividing by the number of units in inventory.
For example:
If you have 100 T-shirts in inventory that cost $5 each:
Total cost of all units in inventory = $5 x 100 = $500
Number of units in inventory = 100
Average cost per unit = $500 / 100 = $5
If you sell 10 T-shirts:
Cost of goods sold = 10 x $5 = $50
In conclusion, Shopify makes it easy to calculate your Cost Of Goods Sold so that businesses have one less thing to worry about!
