#Examples of fixed expenses plus#
It’s sales for the book is $6.25 and its cost of goods sold is the $2.00 plus $0.652 for royalty. Let’s say the publisher had the book printed for $2.00 per copy and it pays the author a royalty of 10%.If the distributor bought the book from the publisher for $6.25, then it’s sales for the book is $10.50, and its cost of goods sold is $6.25.The store’s sales are $19.95 and it’s cost of goods sold is $10.50 plus shipping. When you buy a book for $19.95 at the local bookstore, the store’s cost of goods sold are whatever it paid to buy that book from the distributor.The law firm has what it pays the lawyers, plus legal assistants, and photocopying and research. The taxi or airline has fuel, maintenance, and personnel costs.
If you deliver a service, you still have costs.If you just buy an already-built computer and then sell it, the cost is what you paid to buy it.So, for example, the computer costs $200 to build, including $150 in parts and $50 in labor. Costs of a manufactured product include materials and labor.Costs are supposed to be directly related to sales. They are about what it costs you to have or build or deliver what you’re selling.
If you don’t sell, you don’t have any costs. Costs of sales means what it costs you to make or deliver whatever it is you sell. It isn’t that lunch with the customer or the trip to go visit the customer and make a pitch. The cost of sales is not the expenses related to making a sale. You can’t just decide to think of them as what makes sense to you, because the accountants and analysts won’t understand you. Costs are among the financial and accounting terms that have specific meanings.
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