What is the difference between Net Sales and Cost of Sales?

MS Foodmart database - what is difference between store sales and store cost?

• There is the Foodmart database that was shipped with MS SQL Server 2000 for tutorial purposes. It has a table "sales_fact_1997" that has columns "store_sales" and "store_cost". What is the difference in their actual meaning? Both store currency info - the amount of money that was involved in a transaction (along with pruduct ID, customer ID, store ID etc). It seems to me, that "store cost" means the prime cost of a product (money that the company spent to buy this product) and "store sales" means the product price (money that a consumer spent to buy this product from the company). The only thing that looks odd is that in average "store sales" ~ 2.5 * "store cost". 250% profitability seems TOO MUCH.

• Answer:

  Most wholesale and retail accounting set-ups will have the two categories sales and cost of goods sold. If you thing a 150% (cost * 2.5 = sales is not 250% profit, it's only 150%) markup is unusual, you haven't done a lot of retail work. What you have to understand is that cost of goods sold doesn't often include all the fixed costs like electricity, rents, wages and so on. They all have to be recovered as well. Just out of interest, you might want to think about the marginal cost of Microsoft shipping a copy of Visual Studio once the initial costs have been recovered. It's nowhere near the hundreds of dollars that they charge for it and this goes some way to explaining why Bill G has so much money :-)