2 min read
Definition
Cost of sales (or cost of goods sold) is the direct cost of producing or buying the goods and services a business actually sold in a period — materials, direct labour and directly attributable costs.
In plain terms
It is what it cost you to make or acquire the things you sold, not your overheads. Revenue minus cost of sales gives gross profit, the first measure of whether each sale makes money.
Why it matters for your company
Cost of sales drives your gross margin, the clearest read on product-level profitability. Rising cost of sales that outpaces prices quietly erodes margin — one of the most important trends to watch in your profit and loss.
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