Question

The accounting records for The Cubby Bear indicate that food sales were $31,000, food used was $11,500, and employee meals at cost were $150. What is the cost of sales?

Answer 1

Cost of sales includes all those cost which are incurred to sell the product/goods. These type of cost are direct cost to the product and can be directly relatable to the goods.

In the given question the amount of food used for the food sale will be included and will only be the cost of sales. Employee meals at cost cannot be termed as cost of sales and it do not relate to the goods directly which are sold. This type of cost can be treated as expenses in the income statement will calculate the net profit as these expense are incurred in the normal course of business.

Therefore the total cost of sales will be $11,500.