Scenario: I\'m running a website where customers can take a test and based on th

Question

Scenario: I'm running a website where customers can take a test and based on that test, it will determine the best place to go on vacation. Once that place is found, it will direct them to other websites where they can buy tickets/rent hotel (let's just call them ticketholder.com). We will take 3% per transaction fee from ticketholder.com. (For example let's just say airplane ticket cost 300, we would take 9$)

What is our cost of goods sold? (We don't have any inventory, we're just providing the service, so how can I determine the cost of goods sold? For example, would my CGS be 80% of revenue?)

What would be our variable cost? (customer service and support, information technicians? anything else to determine it?)

What would be our fixed cost? (rent, utilities, and advertising? anything else?)

Again, this is just a website/app.

Explanation / Answer

The Cost of Goods Sold would be the total expenses incurred for maintaining the website/app.

Normally, COGS is Opening Stock + Purchases + Direct Expenses - Closing Stock. In your case, it will be all DIrect Expenses.

Variable cost would be customer service and support, information technicians, bank charges if any for the transaction arrangement if payable on the basis of no. of transactions.

FIxed cost would be rent, utilities, advertising, server maintenance cost, manpower cost i.e. salary to fixed manpower, depreciation on fixed hardware like laptop being used for the business.

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