Cost of Sales
Another term for Cost of Goods Sold, representing the direct costs of producing or acquiring the products or services sold during a period.
Cost of Sales
Another term for Cost of Goods Sold, representing the direct costs attributable to the production or purchase of the goods or services sold by a company during a specific period.
For example, a restaurant’s cost of sales would include food and beverage costs, chef and kitchen staff wages, and other direct costs of preparing meals, amounting to perhaps 30-35% of food and beverage revenue.
The term “Cost of Sales” is often preferred in service industries or when both goods and services are provided. It appears on the income statement immediately after revenue and is subtracted to calculate gross profit. Monitoring the cost of sales percentage (cost of sales divided by revenue) helps management track operating efficiency and pricing effectiveness over time.