Cost of Goods Sold is the COST of what you deliver to your customer; what goes into what you sell. However, when it is a service, sometimes this can be hard to distinguish. A great rule of thumb to consider is "would I have spent money on this -service-product-expense- if I was not servicing my client? If the answer is NO, then it is probably a Cost of Goods Sold/Service.
It is also good to remember that these costs would be VARIABLE to a degree. They would, after a certain point, vary incrementally with the growth or decline of clients serviced.
Therefore, if you are providing an architectural service, the typical costs are things like:
- merchant service fees (for CC, DR, check) processing
- architectural drawings/renderings
- model building
- photographer costs
E&O Insurance, your salary and even software like Adobe would be regular operating expenses. You would have these costs in-house, even if you did not have any clients. FIXED Costs are rarely Cost of Goods/Services Sold.
