Which formula correctly calculates the cost of goods sold (COGS) for a food service operation?

• A. Ending inventory plus purchases minus beginning inventory
• B. Gross profit minus operating expenses
• C. Beginning inventory plus purchases minus ending inventory
• D. Total sales minus COGS

Answer: (C)

COGS reflects the cost of the goods that were actually sold during the period, based on how inventory moved from start to finish. Use Beginning inventory plus Purchases minus Ending inventory. This captures what was available, what was added, and what remains, leaving only what was sold to customers.

The other forms aren’t correct because they don’t follow the inventory flow. Ending inventory plus purchases minus beginning inventory would mix the ending stock with prior stock in a way that doesn’t represent what was consumed or sold. Gross profit minus operating expenses isn’t COGS at all; gross profit already subtracts COGS from sales, so removing operating expenses changes what’s being measured. Total sales minus COGS gives gross profit, not COGS.