How to Calculate COGS for Small Business
Many entrepreneurs fail because they set their selling prices incorrectly. Often they only count the purchase price without including **hidden operational costs**. With this **online COGS calculator**, you can calculate the real cost per product accurately.
Standard Formula for Selling Price
This calculator uses the *Cost-Plus Pricing* method, where the selling price is determined by adding a profit percentage to the total production cost (COGS). The formula is:
Selling Price = COGS / (1 - Decimal Margin)
Steps to Use the Calculator:
- Enter Material Cost: The purchase price from the supplier or total raw materials to produce 1 unit.
- Add Operational Costs: Calculate estimated costs for electricity, water, rent, and labor allocated to that 1 unit of product.
- Set Target Margin: If you want a 30% net profit, enter 30. Remember, this margin is different from *mark-up*.