Definition

Cost of sales (COS) indicates how much a retail or wholesale business spends on the products it purchases from suppliers for resale. Traditionally it has only offered ACoS (Advertising Cost of Sale). ACoS increases when spend grows faster than revenue and goes down when revenue grows faster than spend.

Application

Formula for calculating COS:  

ACoS = Ad Spend/Ad Revenue

ACoS, however, provides a straightforward way to gauge the profitability of a campaign — making it great for understanding your break-even point. To understand what is driving (and impeding) ACoS, focus on CVR, CTR and CPC. (Conversion-Rate, Click-Through-Rate, Cost-Per-Click).