You are a partner in the consulting firm of Ernest, Inc. One of your clients has asked your assistance in explaining the term cost as used in accounting. The client relates the following incidents using the term cost:

A. A sales supervisor in a large automobile dealership encourages a prospective customer to buy a new car by agreeing to sell at the dealership’s cost. When the customer again asked what the price would be, the sales supervisor assured the customer of only paying cost by signing the agreement. Further, the dealership would not be making any profit from the sale.

B. The owner of Jones Furniture Store explained to the company’s banker why company income was down by stating, “My costs this year increased 25 percent.
Because revenues did not increase this much, income is lower.”
C. In viewing an income statement, the client notices that cost of goods sold is deducted from sales to give gross margin.
Required:
Determine whether cost is correctly used in these incidents and what connotation it has in each.