trends begin developing. Of course, you can change the timeframe if necessary. For instance, if you are starting a beer stand for the annual county fair or a vineyard with a five-year growing cycle, a different timeframe will make sense for you.     C. Determine Your Average Cost of Sales     Your first step in your profit and loss projection is to determine your average cost of sales-that is, your direct cost of the products or services you sell. Youll use the Sales Revenue Forecast you completed F1, to make this estimate.     One way to derive your average cost of sales is to estimate your annual sales revenue for each product or service. Then calculate each products annual cost of sales. Finally, add up the numbers to get an annual average.           More Detailed Method to Determine Average Cost of Sales     Another way to calculate your average cost of sales is to make a separate monthly sales revenue and cost of sales forecast for each of your major product or service lines. If you complete a separate monthly forecast for each of your product or service lines, you will have a very detailed forecast. However, many people balk at this level of detail in forecasting and wish to proceed with the less-detailed method demonstrated in this section. Either way is acceptable.           WarningWhether you make one annual cost of sales forecast or a number of detailed forecasts, dont forget about the inevitable percentage of merchandise you will have to move at marked- down prices. Whether youre in the book business, bake cookies or are a child psychologist, chances are you will commonly sell some of your product or services for less than standard prices. This may be because you need to move out last years styles or because you need to sell broken cookies or because you provide counseling cheaper to low-income groups.     Example: Antoinette Gorzak plans to sell dresses for an average price of $250, and her research shows they will cost $125 each. Her cost of each sale for dresses before she allows for labor and other overhead will be 50% of the selling price. If she plans to give her customers anything with the purchase, say a specially printed shopping bag and an imprinted dress box, she should include the cost of these items as part of her cost of sales. Maybe this will make her cost of each sale 51% or 52% instead of 50%. Since Antoinette sells accessories in addition to dresses she needs to allow for different gross profit margins for the additional merchandise. A cost of sales averaging chart for Antoinettes Dress Shop might look like this:     Annual Average Cost of Sales Chart: Antoinettes Dress Shop       Total Average Cost of Sales = 61.8%   ($247,400 divided by $400,000)     *These percentages come where she calculated gross profit. To get cost of sales percentage, simply subtract gross profit percentage from 100%. The remainder is cost of sales.