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Cost of Sales
Business
WHAT IS IT?
Cost of sales is the direct cost associated with producing or delivering the goods or services sold.
IN PLAIN ENGLISH
It is the cost directly linked to making the sale happen.
SIMPLE EXAMPLE
If a meal sells for £15 and the direct food and drink cost is £5, the £5 is part of the cost of sales.
WHY DOES IT MATTER
Separating direct costs from regular overheads helps you understand gross profit and margin.
THE ROCKET TEST
Cost of sales is the direct cost attached to what you sold.
SEE IT IN ACTION
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