Cost of Sale

by Investing School on March 2, 2010

The cost of sales is an important component of many businesses. It involves determining the cost of expenses necessary for the manufacturing of goods. Specifically, it refers to the cost of raw materials related to the manufacturing of goods that are sold by the company. It is also sometimes referred to as cost of goods sold or COGS. The number associated with the cost of sales is often used to determine the overall costs of creating and manufacturing products that are sold by the company.

If you want to calculate the total of the actual cost of sales, the numbers that you will need in order to calculate this will be found on the company’s income statement. The cost of raw materials will not be the only factor in the equation. However, not every company will use the same elements when calculating cost of sales. There are several types of expenses to consider when calculating this figure.

Not only will you need to account for the cost of raw materials, the cost of the labor that will be associated with making those raw materials into products need to also be factored in. Labor costs can include a variety of things such as wages, tips, the cost of benefits and health insurance. Accrued vacation time can even be included. Employees that are directly involved in the making of the product can be included. This may be assembly line workers and in some instances their supervisors. All of these things contribute to the cost of sale.

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