according to the amount of expected sales revenue and is derived by dividing the total cost of sales by the expected sales revenue ($247,400 divided by $400,000).     An average cost of sales of 60% is reasonable for many profitable retailers. Even though it is wise to be a little conservative, Antoinette uses 60% as her cost of sales when forecasting profits.       You can use the procedure in the example above to estimate your average cost of sales if youre in the retail, manufacturing or wholesale businesses. Simply modify the item categories to fit your beer/wine and possibly take-out orders. Another example, for a bar and restaurant, is shown below.     Annual Average Cost of Sales Chart: Bar and Restaurant             By definition, service businesses sell services or labor and do not sell merchandise. Occasion- ally they may bill a client for a service they purchase outside the firm or bill for a service that has some incidental costs. The cost of sales portion of a service business total costs will be low. For example, a consulting firm may incur outside typing, photocopying and report binding expenses that will vary somewhat with every sale. Most expenses, such as salaries and rent, will be fixed costs and wont appear on this chart. Service businesses should follow the example below of the consulting business.     Annual Average Cost of Sales Chart: Consulting Firm             Billable Item x = Billable Item Forecast Sales Revenue x Cost per Sale = Total Cost of Sales   Publications, phone, travel $100,000 20% $ 20,000     Contract services (Typing, etc.) 50,000 75% 37,500     Studies, Consultations 527,000 0% 0             TOTAL $677,000 $57,500