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Home Definitions

What is Cost of Sales? Definition or Meaning

Posted by Bizversity

Cost of sales refers to the amount of money you spend manufacturing, holding and providing goods for your customers. A formula to calculate the cost of sales for a retailer would be the cost of merchandise in the beginning inventory plus the net cost of merchandise purchased minus the cost of merchandise in its ending inventory.

For example…

Say I had a fish n’ chips shop and had $1000 worth of fish (or inventory) in my store, then spent $500 buying some more fish that month and had $300 worth of fish left at the end of that month. My cost of sales for that month would be $1200. As such, my beginning inventory of $1000 plus purchases of $500 minus ending inventory of $300 equalled my cost of sales of $1200.

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