How COGS Is Applied to Orders
1. Effective Date Logic
Each cost entry has an Effective Date.
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When an order is placed, the system selects the most recent cost record whose effective date is on or before the order date.
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This ensures historical accuracy—older orders keep their original cost even if prices change later.
Example
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Cost effective Jan 2, 2026: $150
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Order date: Jan 10, 2026
→ COGS used = $150 per unit
2. Quantity (Volume Tier) Logic
COGS can change based on quantity purchased in a single order.
Each tier includes:
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Minimum Quantity
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Unit Cost
The system:
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Looks at the order line quantity
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Applies the highest matching tier
Example
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Order of 5 units → $150/unit
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Order of 12 units → $140/unit
3. Line-Item COGS Calculation
For each order line:
Line COGS = Unit Cost × Quantity
Example
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Unit cost: $150
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Quantity: 2
→ Line COGS = $300
How COGS Affects Profit
Profit is calculated per order as:
Profit = Revenue − COGS − Shipping − Fees − Other Costs
So COGS is usually:
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The largest single cost component
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The first deduction from revenue
Example Order
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Revenue: $400
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COGS: $300
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Shipping: $25
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Fees: $15
Profit = 400 − 300 − 25 − 15 = $60
If COGS is incorrect or missing:
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Profit appears inflated
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Margin percentages become misleading
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Scaling decisions are based on false data