How do I allocate freight per unit?

Total freight and duty cost divided by units in the shipment. If a container cost $18,000 in freight and $4,000 in duties for 6,000 units, that is $3.67 per unit. Track this per PO because rates change every quarter and averaging across years hides cost drift.

Should 3PL fees be in COGS?

Inbound 3PL receiving fees yes. Outbound pick-pack-ship fees also belong in COGS because they scale with every order. Storage fees are a gray area: most brands put them in operating expenses because they are not tied to a specific unit. Be consistent either way.

What about samples and production waste?

Build a yield factor into material cost. If your supplier quotes $8 per unit but you have 3 percent defect rate, your effective material cost is $8.25. Samples sent to influencers should be tracked as a marketing expense, not COGS, because they do not generate direct revenue.

How does COGS interact with gross margin?

Gross margin is revenue minus COGS, divided by revenue. If your COGS is understated by 10 percent, your reported gross margin is overstated by 10 percent. Every pricing and media buying decision is now wrong in the same direction. Accurate COGS is the foundation.

Profit & Pricing · Free Tool

COGS Calculator

Calculate the fully-loaded cost of each unit you sell. Most founders underestimate COGS by 10 to 20 percent because they forget packaging, inbound freight, or duties. Get the number right before you price.

COGS = Material + Labor + Packaging + Inbound Freight

Unit material cost ($)

Labor per unit ($)

Packaging per unit ($)

Inbound freight per unit ($)

From MagicFit

Accurate COGS is the difference between real profit and a shortfall

Every pricing, margin, and ROAS decision depends on this number. Get it honest, then make sure your ads can sell at full price. MagicFit ships fresh creative weekly so discounting never has to be your growth strategy.

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How to use this COGS Calculator

COGS is the direct cost of putting a unit in a customer's hands, calculated before any marketing or overhead. A product that costs $8 in materials, $1.50 in assembly, $1 in packaging, and $2 in freight has a real COGS of $12.50, not $8. If you price at $30 using the $8 number, your real gross margin is 58 percent, not 73 percent, and every decision downstream (ad budget, discounting, product expansion) is off.

The four line items in this calculator cover 95 percent of DTC brands. What most founders miss: inbound freight and duties. If you import and pay $15,000 in freight for a container of 5,000 units, that is $3 per unit before anything else. Duties add another 6 to 20 percent depending on category. Land it properly in COGS or your margin math is fiction.

Recalculate COGS every quarter at minimum. Supplier prices change, freight rates move (often 20 to 40 percent year over year), and packaging tweaks add up. The fastest wins usually come from consolidating SKUs to hit higher MOQ tiers with your supplier, not from squeezing individual line items.

Frequently Asked Questions

Direct material cost, direct labor, packaging, and inbound freight plus duties. Do not include ad spend, software, rent, or salaries for founders and office staff. Those are operating expenses. The line is: anything that scales with a unit sold belongs in COGS.