Cost of Goods Available for Sale
Cost of Goods Available for Sale (COGAS) is an inventory-related calculation used in the cost of goods sold (COGS) accounting process. It represents the total inventory costs of a business that are available for sale to customers during a particular period.
The COGAS includes the beginning inventory (the leftover inventory from the previous period) plus any purchases made and any additional costs of production incurred during the current period.
The formula to calculate COGAS is:
Cost of Goods Available for Sale = Beginning Inventory + Purchases + Additional Costs of Production
Example of Cost of Goods Available for Sale
Let’s consider a hypothetical example:
Company XYZ manufactures and sells widgets. At the start of the year, it has $200,000 worth of widgets in its inventory (Beginning Inventory).
Over the course of the year, the company purchases an additional $500,000 worth of raw materials to produce more widgets (Purchases). It also incurs $100,000 in labor costs to assemble the widgets, which are considered Additional Costs of Production.
We can calculate the Cost of Goods Available for Sale (COGAS) as follows:
COGAS = Beginning Inventory + Purchases + Additional Costs of Production
COGAS = $200,000 + $500,000 + $100,000 = $800,000
So, Company XYZ has $800,000 worth of goods available for sale during the year.
At the end of the year, let’s say Company XYZ has $150,000 worth of widgets left in its inventory (Ending Inventory). The Cost of Goods Sold (COGS) can be calculated by subtracting the Ending Inventory from the COGAS:
COGS = COGAS – Ending Inventory
COGS = $800,000 – $150,000 = $650,000
So, Company XYZ sold $650,000 worth of widgets during the year, and it will start the next year with $150,000 worth of widgets in its inventory.
