---
title: "Cost of goods sold (COGS): definition and formula"
description: "What the units you sold cost you to make or buy. In an offer calculation it is charged per unit, gifts included, at the cost in effect on the order's date."
url: https://offersuite.io/glossary/cost-of-goods-sold
updated: 2026-10-13
---

# Cost of goods sold (COGS)

What the units you sold cost you to make or buy. In an offer calculation it is charged per unit, gifts included, at the cost in effect on the order's date.

## In plain words

Cost of goods sold is the cost of the units you sold: the manufacturer's price, or what it cost you to make them. For an offer it is counted per unit shipped, including units given away. A free mug has a cost of goods even though the customer paid nothing for it.

Unit costs change over time, with new suppliers, new batches, freight rates and currencies. The cost that matters for an order is the one that applied when the order was placed, and not today's.

## Formula

- COGS for an order = Σ (units of each product × that product's unit cost)

## Worked example

A three-bag order costs $36.00 in goods: three units at $12.00. With a $4.00 mug as a gift, the engine puts its cost of goods at $40.00, and the customer still pays $102.00.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## COGS is not landed cost, and not the whole cost of an order

Many brands enter only the supplier's price. Landed cost adds what it took to get the unit to your warehouse: inbound freight, duties and brokerage. And an order costs more than its goods, because fulfilment, shipping and fees come on top. Treating COGS as the order's cost is the gross-margin mistake.

## Using it

Enter unit costs with the date they apply from, and correct them by adding a new dated cost, not by overwriting the old one. Include every unit that ships: gifts, samples, inserts and the free item in a buy-one-get-one. A gift with no unit cost entered makes every order it rides on look more profitable than it is.

## In Offer Suite

Offer Suite keeps costs as a ledger. Every cost row has the date it applies from, and rows are appended and never edited. An order is costed at the ledger as it stood for the order's date. The as-recorded view keeps that basis; a later correction restates the order in the current view.

Source: Offer Suite's cost ledger.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Gift with purchase profit calculator** What a free gift costs per order, after its unit cost, its extra pick and its handling, and how much conversion it has to add to pay for itself.](https://offersuite.io/calculators/gift-with-purchase-profit)
- [Calculator **Bundle pricing calculator: shipping, subscriptions** Price a bundle against a single unit, one-time and subscribed, with the shipping and pick costs it saves, and the conversion it can lose and still earn as much.](https://offersuite.io/calculators/bundle-pricing)
- [Glossary **Landed cost: definition, formula and example** A unit's full cost on your shelf: the supplier's price plus inbound freight, duties and brokerage. The unit cost an offer should be priced on.](https://offersuite.io/glossary/landed-cost)
- [Glossary **Gross margin: definition, formula and example** Revenue minus the cost of the goods sold, as a share of revenue. The accounting margin: it leaves out shipping, fulfilment and payment costs.](https://offersuite.io/glossary/gross-margin)
- [Glossary **Cost restatement: definition, formula and example** Repricing past orders after a cost is corrected or backdated, while keeping what they were booked with. Both numbers stay, so the change is traceable.](https://offersuite.io/glossary/cost-restatement)