The cost of sales of an enterprise is a more general concept, an integral part of which is the production cost. In addition to direct costs for the production of goods or services, the company has commercial costs. In total, these expenses make up the actual cost of sales.
Sometimes the share of financial costs (product promotion, advertising, etc.) may exceed other items. At the same time, even if the enterprise's technological processes are relatively cheap, there is a possibility that the business will be unprofitable, for example, if the costs of selling a product are significantly higher than the costs of its production. That is why the cost of sales is one of the main key performance indicators. It is used to analyze the company's profitability.
When calculating, the cost of job seekers data package production is usually not subject to comparison with income. As a rule, the entire continuous production process is conventionally divided into separate stages, the costs of which are analyzed. This approach allows you to find reserves and increase the financial efficiency of manufacturing products. For example, improve logistics, cooperate with suppliers of material and technical assets offering lower costs with unchanged quality, etc.
The total cost of production is compared with sales revenue, which makes it possible to determine the profit and profitability of the company.
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Relationship between cost of sales and revenue
Revenue is understood as the total income of an enterprise from the sale of manufactured goods or services. The coefficient can be calculated using a simplified method. To do this, you need to find the product of the cost of a unit of product and the quantity of goods sold for a certain reporting period.
To determine a company's profit, the cost price is subtracted from the total sales revenue. If the company's income exceeds the total expenses, it can be said that the company is commercially successful. Otherwise, losses are recorded.