A margin is a percentage of sales and production that can be used to assess profitability.The method below will show you how to calculate the gross profit margin for your business.
Step 1: The data from the business operation should be gathered.
All data should be gathered over the same period of time to get accurate figures.
Step 2: Find the total revenue for the time period.
This is your sales receipt from the period.
Step 3: The cost of goods sold can be calculated.
If you make the products in-house, production costs may be included.If you buy from a supplier, it may be the purchase price.Don't include taxes, interest or general business expenses.These aren't accounted for in gross profit margin, but they are used to figure out net income from the business as a whole.If you want to figure out the profitability of several products, you can separate the total revenue and total cost of goods sold for each product and find individual gross profit margins.
Step 4: The total revenue generated by the goods should be subtracted from the cost of goods sold.
If you made $200 selling 100 cans of soda and the cost of the goods sold was $100, your gross profit would be $100.
Step 5: The gross profit should be divided by the cost of goods sold.
To get a percentage, Multiply the number by 100.The figure is 1 if you divide $100 by 100.You get a gross profit percentage of 100 percent if you add it up.
Step 6: The potential profitability of products can be calculated by using individual selling prices and unit costs.
Step 7: Take the price of a can of soda.
Take the selling price of an individual can into account.
Step 8: Take the cost of a can of soda out of the equation.
It is your gross profit.
Step 9: Divide the gross profit by the cost of the unit.
To get the percentage, Multiply by 100.We get a profit margin percentage of 100 percent when the gross profit is divided by $1.00.
Step 10: This procedure can be used to figure out the most profitable goods for your business.