How to Get the Gross Profit Margin
Looking at a company's revenue figure provides information as to how well the company is selling its product, but it doesn't reveal how much the company makes off of each product sold. If a company sells 100 aquariums for $200 each, the revenue figure is high, but the company's profit on those aquariums may be low. The gross profit margin serves as a percentage of profit the company makes off of each sale after taking into account the money it costs to produce the goods sold.
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Instructions
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Determine your total revenue in a given month, quarter or year, depending on which time period you're looking at. If you want to find the gross profit margin of one product, determine the revenue for that product only.
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Calculate how much money your company spend producing the products that you sold. For example, if your company sold 1,000 computers, and the cost to produce each computer was $500, your total product cost would be $500,000.
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Subtract the total product cost from your total revenue. Divide that number by your total revenue and multiply by 100 to find the gross profit margin. For example, your business brings in $80,000 in revenue over one year from selling various pet products. The total cost to produce those products is $45,000. To find the gross profit margin, you would take $80,000 minus $45,000 to find $35,000, then take $35,000 divided by $80,000 to find 0.4375. After multiplying that number by 100, your gross profit margin would be 43.75 percent.
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Tips & Warnings
Cost of goods refers to any cost that is directly related to producing a product, such as labor and raw materials.
