Cost of sales (COS)

Cost of sales (COS) indicates how much a retail or wholesale business spends on the products it purchases from suppliers for resale.

Cost of sales appears as a direct cost on the income statement. It is used only by companies that do not manufacture their own products for sale. (Manufacturing companies have a different measure of direct costs—cost of goods sold—which indicate how much they spend making their products.)

Managers use the cost of sales to assign value to units in inventory. As a percentage of revenue, cost of sales determines purchasing efficiency.

More about cost of sales

The sample income statement below shows the cost of sales for a retailer/wholesaler that purchased 10,000 units of a single product for $3.50 each and sold each unit for $10.