How to Estimate Gross Profit
The gross profit measures how much income you have left after accounting for the costs of goods sold. Estimating your gross profit helps you figure out how much money you have left after paying for the items you sell to use for other costs, such as sales people and advertising. If you want to compare multiple products or years, you can figure the gross profit ratio, which measures your profits as a percentage of the total revenue.
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Instructions
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Estimate the price at which you will sell your products in your store and the cost you pay per product. For example, you might plan to sell the new netbook for $400, even though you only paid $280.
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Multiply the estimated cost by the number of unit you expect to sell. In this example, if you expect to sell 1,000 units, multiply $280 by 1,000 to find your total costs equal $280,000.
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Multiply the estimated selling price by the number of unit you expect to sell to find the total revenue. In this example, if you expect to sell 1,000 units, multiply $400 by 1,000 to find your total revenue equal $400,000.
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Subtract the total cost from the total revenue to find the gross profit. In this example, subtract $280,000 from $400,000 to find your estimated gross profit the netbooks equals $120,000.
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Divide the estimated gross profit by the estimated revenue to find the gross profit ratio. In this example, divide $120,000 by $400,000 to get 0.3, or 30 percent.
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