If we discuss the cost of goods sold, then we can describe it as “Cost of goods sold is the cost which incurred for selling the goods of an entity”. The term “cost of goods sold ” often used for manufacturing and trading businesses. When we talk about service businesses, we will use the word “Cost of Service or Cost of Revenues”.
In this article, we will discuss the term cost of sale, the cleaning industry, cost of revenue for the cleaning industry, and methods for calculation of the cost of revenue for the cleaning industry.
Cost of revenue:
The cost of revenue is also known as the cost of services. If we talk about the cost of revenue or cost of service, then those are costs directly incurred in rendering services.
Fixed costs will not be included in the cost of revenue or services. Other indirect expenses likes, fixed salaries, and administrative expenses will not be included in the cost of revenue.
The cleaning industry includes cleaning and restoration services to commercial and residential markets. The most popular services in cleaning include office interior spaces, office cleaning, window cleaning, glass cleaning, and some other customized services depending on the entity’s size and priorities.
Many cleaning businesses provide their services at the customer’s location and deliver them at the demanded location.
Cost of Revenue in the cleaning industry:
The cleaning industry is based on rendering services; some cleaning businesses consume cleaning materials by themselves, like cleaning chemicals, dusters, and Soaps. Items used to provide cleaning services will be part of the cost of sales or cost of service.
Some cleaning entities deliver their services at the customer’s doorstep or home delivery services then their cost of services will be delivery expenses, carriage, and other relevant costs that occurred due to providing the service or sale.
Labour used to provide the service will also be included in the cost of sales or cost of services if the remuneration of labor is based on performing the service, which means the entity does not provide fixed salaries to the respective labor force.
If labor’s salaries are fixed, then they should not be included in the revenue cost, deemed administrative expenses.
Other than material, labor and carriage cost any additional cost incurred to provide the service will also be included in the sales price, like commission given to any contractor or a third party, any service outsourced.
In short, all variable expenses to render the service will be included in the business’s sales cost.
Any fixed costs like rents, administrative expenses, and utility expenses will not be part of the cost of sales. The cost of sales will be deducted from Sales Revenue for the calculation of the gross profits of the business.
Cost of sale is a very crucial part of the expense decision-making; it is necessary to understand the cost of sale to determine the service’s price and gross profit margins.
Without understanding and calculating the cost of sales, it might not be possible for an entity to achieve its financial objectives.
Many other factors might not be covered in this short article. I always appreciate comments and give your feedback if you have any questions in your mind about the cost of sales in the cleaning industry.
I hope to see you again; keep clean your society.