What are costs of sales?

Definition of costs of sales

Costs of sales are day-to-day running costs of a business that relate directly to particular individual sales the business makes.

Running costs that do not relate directly to individual sales are called 'overheads'.

Examples of costs of sales:

Examples of costs of sales would be: raw materials to make goods for sale, salaries for factory workers who are making goods for sale, and postage of finished goods.

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Businesses that sell the owner's own labour, as opposed to businesses that sell goods, may have few or no costs of sales.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.