MARGINS, EXPENSES, aXD PROFITS IX RETAILING MEAT 5 
in order that proper comparison might be made between stores. 
It was necessary to adopt a uniform classification of accounts and 
definition of terms. 
DEFINITIONS OF TERMS 
NET SALES 
The net-sales item was the total of all receipts from sales of 
merchandise less any allowances or discounts made to customers. 
Receipts from sales of fats, bones, hides, containers, and other items 
connected with the retailing of meat were included. The net -sales 
amount formed the basis for the calculation of the various percent- 
ages shown as margins, expense, profits, and losses since these items 
are shown as percentages of net sales. 
COST OF GOODS SOLD 
All expenditures for goods actually sold were included in cost of 
goods. This figure was determined by adding to the value of the 
inventory of stock on hand at the opening of the period for which 
the cost of goods was to be determined the total purchases of goods 
made during the period, and subtracting from this combined total 
the value of the inventory at the close of the period, together with 
allowances and discounts received on purchases, plus the cost of goods 
used by the proprietor and family, plus any goods given to employees. 
The resulting amount was the cost of goods actually sold during the 
period. 
GROSS MARGIN 
The difference between net sales and cost of goods sold was the 
gross margin, sometimes called the gross profit. Out of this margin 
the dealer paid his expenses of operation before realizing a profit. 
TOTAL EXPENSE 
Total expense was composed of salaries, wages, rent, wrappings, 
refrigeration, light and power, depreciation, telephone, laundry, bad 
debts, advertising, insurance, taxes, repairs, delivery expense, and 
various items of unclassified expense. The amount as used in this 
survey was larger in most instances than that usually regarded as 
total expense by retail meat dealers. This fact arose from the includ- 
ing of certain items which were not always recognized by retailers as 
expenses. The chief of these items were proprietor's salary, wages 
of a partner or partners or of an} 7 member or members of the pro- 
prietor's family who were engaged in the business, rent on buildings 
owned by the business and used in the conduct of the business, and 
depreciation on shop, office, and delivery equipment. Interest on 
investment was not included as an expense. 
From gross margin must be deducted total expense before a profit 
is realized. It is obvious that the gross margin must at least be 
equal to total expense if the business is not to be operated at a loss. 
Thus any amount remaining after the deduction of total expense 
