and click Calculate
Reference: industry COGS benchmarks, classification rules, and platform export mapping
Cogsly calculates COGS, gross profit, and gross margin from five inputs. The reference below covers the domain numbers and classifications that decide what you actually type into those fields: industry margin benchmarks, line-item classification rules, cost-flow method tax effects, platform export mappings, and the audit traps that misstate inventory.
Industry gross margin benchmarks (US, 2024-2025)
Use these as the calibration check after Cogsly returns your margin. A margin two points off the sector median is normal; ten points off usually signals a classification error somewhere upstream.
| Sector | Typical gross margin | Source basis |
|---|---|---|
| Apparel (DTC) | 50% to 65% | NYU Stern retail-DTC composites |
| Apparel (wholesale) | 30% to 45% | IBISWorld retail apparel |
| Candles (handmade) | 60% to 75% | Etsy seller surveys 2024 |
| Cosmetics (indie) | 65% to 80% | Indie beauty benchmarks |
| Print-on-demand | 20% to 35% | Printful/Printify pricing |
| Consumer electronics accessories | 35% to 50% | Amazon FBA category data |
| Food and beverage (CPG) | 25% to 40% | IRI consumer goods |
| Subscription box | 40% to 55% | SUBTA 2024 industry report |
| Coffee (roasted) | 55% to 70% | SCA cafe operations |
| Jewelry (handmade) | 55% to 70% | Etsy seller surveys 2024 |
| Pet products | 40% to 55% | APPA market report |
| Home goods (small batch) | 50% to 65% | Etsy seller surveys 2024 |
| Health supplements | 60% to 80% | NPD beauty/wellness |
Margins below the sector floor usually trace to one of three issues: outbound shipping rolled into COGS, freight-in left out of purchases, or a stale ending inventory count.
Direct expense classification matrix
Every dollar of cost lands in one of three buckets: included in COGS, below the gross-profit line, or capitalized to the balance sheet. The table is what you reach for when you are staring at a Shopify or QuickBooks export and trying to decide which column belongs in the Purchases field.
| Line item | In COGS? | Where it goes |
|---|---|---|
| Freight-in (inbound to your warehouse) | Yes | Add to Purchases or Direct Expenses |
| Freight-out (outbound to customer) | No | Selling expense (below GP line) |
| Import duties and tariffs | Yes | Direct Expenses |
| Customs broker fees | Yes | Direct Expenses |
| Per-unit packaging (boxes, polybags, labels) | Yes | Direct Expenses |
| Shipping supplies for outbound orders | No | Selling expense |
| Inventory storage at 3PL | Mixed | Allocate by inventory turn |
| Pick-and-pack fees | No | Fulfillment / selling expense |
| Factory labor on specific runs | Yes | Direct Expenses |
| W-2 admin salaries | No | Operating expense |
| Office rent | No | Operating expense |
| Warehouse rent (inventory storage) | Yes (allocated) | Direct Expenses |
| Software subscriptions (Shopify, QuickBooks) | No | Operating expense |
| Sales tax on inventory (non-recoverable) | Yes | Add to landed cost |
| Sales tax on inventory (resale exempt) | No | Not a cost |
| Returns processing | No | Returns provision |
| Damaged or shrunk inventory | Yes | Reduces ending inventory |
| Manufacturer royalties per unit | Yes | Direct Expenses |
| Trade show booth fees | No | Marketing |
| Product photography | No | Marketing |
| Subcontracted manufacturing | Yes | Direct Expenses (treat as purchase) |
The rule of thumb: trace the dollar to a specific SKU or batch. If you can, it belongs in COGS; if you cannot, it does not.
Cost-flow method comparison
Cogsly accepts the dollar values your accounting system produces. The values themselves depend on which cost-flow method that system uses. The table below covers the three permitted under US GAAP and the one banned under IFRS.
| Method | COGS in rising prices | GP in rising prices | US GAAP | IFRS | Tax effect (US, rising prices) |
|---|---|---|---|---|---|
| FIFO | Lower | Higher | Allowed | Allowed | Higher taxable income |
| LIFO | Higher | Lower | Allowed | Banned | Lower taxable income (LIFO reserve) |
| Weighted average | Middle | Middle | Allowed | Allowed | Middle |
| Specific identification | Actual | Actual | Allowed (limited) | Allowed (limited) | Matches actual |
Rising-price patterns reverse in deflationary periods (2009, parts of 2015). LIFO conformity under IRC §472 requires LIFO on the financial statements if used for tax. You cannot have it both ways.
Landed cost components
Landed cost is the unit purchase price plus every dollar spent to get the unit ready to sell. The components below are the line items you collect from supplier invoices, freight invoices, and customs documents before deciding what goes into the Direct Expenses field.
| Component | Typical share of unit cost | Source document |
|---|---|---|
| Unit purchase price | 60% to 85% | Supplier invoice |
| Ocean freight | 5% to 15% | Freight forwarder invoice |
| Air freight (rush) | 15% to 40% | Carrier invoice |
| Domestic trucking (port to warehouse) | 2% to 8% | Trucking BOL |
| Import duty (varies by HTS code) | 0% to 25% | CBP entry summary |
| Section 301 tariffs (China) | 7.5% to 25% | CBP entry summary |
| Customs broker fee | $50 to $250 per entry | Broker invoice |
| Harbor maintenance fee | 0.125% of cargo value | CBP entry summary |
| Merchandise processing fee | 0.3464%, capped | CBP entry summary |
| Insurance (cargo) | 0.5% to 1.5% of cargo value | Insurance certificate |
| Per-unit packaging | $0.20 to $2.00 per unit | Supplier or 3PL invoice |
| Inspection / QC | $0.10 to $0.50 per unit | QC vendor invoice |
A landed-cost markup of 1.15× to 1.40× over FOB price is normal for ocean freight from Asia. If your true ratio is below 1.10× or above 1.50×, recount the components.
Common COGS errors and fixes
The table below maps the symptom Cogsly returns to the underlying data error. Use it as a checklist before trusting a margin number that looks off.
| Symptom | Likely cause | Fix |
|---|---|---|
| COGS negative | Ending inventory entered greater than beginning + purchases | Recount; check for write-up posted without offset |
| Margin above 95% | Cost of goods omitted entirely; only freight in Purchases | Verify Purchases field has unit cost, not just freight |
| Margin below 5% or negative | Outbound shipping rolled into Purchases or Direct Expenses | Move outbound to Selling Expense |
| Margin 10+ points above sector median | Beginning or ending inventory understated | Reconcile to physical count |
| Margin 10+ points below sector median | Returns provision or write-offs included incorrectly | Separate returns; book write-offs to ending inventory adjustment |
| COGS jumps quarter-over-quarter with flat revenue | Period cutoff error on purchases | Check POs received within 3 days of period close |
| Direct expenses field unused | User skipped landed cost | Add freight-in, duties, packaging to Direct Expenses |
| Gross profit positive but operating loss | Healthy COGS, overhead too high | COGS is fine; problem sits below the gross-profit line |
Platform export to Cogsly field mapping
The default account names exported by the most common SMB platforms do not line up with the Cogsly fields one-to-one. The map below tells you which export column goes where.
| Platform / Export | Beginning Inventory | Purchases | Direct Expenses | Ending Inventory |
|---|---|---|---|---|
| Shopify (Inventory CSV) | Prior period closing valuation | "Cost per item" × quantity received | Manual (freight invoices) | Current valuation report |
| QuickBooks Online | Inventory Asset (opening balance) | 5xxx COGS accounts | Freight-In, Tariffs sub-accounts | Inventory Asset (closing balance) |
| Xero | Inventory asset opening | Cost of Goods Sold purchases | Freight & courier (inbound only) | Inventory asset closing |
| Wave | Cost of Goods Sold opening | Inventory purchases | Manual | COGS adjustment closing |
| Etsy (Stats export) | Manual (Etsy does not track) | Sum of "Item cost" listings | Etsy "Shipping label" (inbound only) | Manual recount |
| Amazon FBA (Inventory Ledger) | Period-start inventory value | Inbound shipment cost report | Inbound shipping + FBA prep | Period-end inventory value |
Etsy and Amazon both require some manual reconstruction because neither platform tracks beginning inventory natively. Bringing forward last period's ending count is the cleanest path.
Reference citations
| Topic | Authority | Document |
|---|---|---|
| LIFO permitted, conformity rule | US IRC §472 | IRS Publication 538 |
| LIFO banned | IFRS | IAS 2 Inventories |
| HTS classification | US ITC | Harmonized Tariff Schedule |
| Section 301 tariff lists | USTR | Section 301 actions |
| Margin benchmarks | NYU Stern | Damodaran industry data |
| Retail inventory accounting | FASB | ASC 330 Inventory |
Related concepts
- Contribution margin. Revenue minus all variable costs (including outbound shipping and payment fees). Sharper unit-economics view than gross margin.
- Operating margin. Gross profit minus all operating expenses. The line investors read when assessing profitability.
- EBITDA. Operating profit before depreciation and amortization. Standard valuation metric.
- Inventory turnover. COGS divided by average inventory. Below 4× per year usually signals overstock.
- Days inventory outstanding (DIO). 365 divided by inventory turnover. Ecommerce target is 60 to 90 days.