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Cost Of SalesCost of sales is an economical term describing the sum of all expenses that directly contribute to the generation of revenue. These expenses vary with the type of business. In accounting, cost of sales is usually an equivalent term to cost of goods sold (COGS). In a manufacturing firm, such as Coca Cola, cost of sales would include the direct materials (aluminum, water, syrup), direct labor (wages of factory workers), and manufacturing overhead (line manager, utilities, rent, insurance for factory) that went into making only the products that were sold. The cost of sales for a merchandising firm typically includes the cost of the inventory sold, warehouse and transportation costs, and other costs associated with bringing inventory to stores. It does not include costs associated with retail stores, and wages for retail employees. Cost of sales may be shown on a company's income statement. Alternate names include "cost of goods sold" and "merchandise costs". Service firms, such as airlines, do not typically have a line for cost of sales on their income statements.
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