How to Calculate a Gross Profit on an Individual Item

Determining what your business should sell must balance your desire to sell in-demand items with those that bring a large profit. The gross profit of an individual item measures the amount of profit you make on each sale. To figure the gross profit, you need to know your costs and your selling prices for the individual item.

Instructions

1. Add the costs of constructing the item. For example, if you make the item yourself, you could include raw material costs and labor costs. If you build furniture and you pay $50 for wood and $30 for a carpenter to make the table, the cost to you is $80. If you are a retailer, just use the cost you pay.

2. Subtract the cost of constructing or purchasing the item from the price at which you sell the item. If you sell the table for $145, subtract $80 from $145 to get a gross profit of $65.

3. Multiply the gross profit per item by the number of units you sell to find the total gross profit for the individual item. For example, if you sell 400 tables, multiply the gross profit of $65 by 400, to find the total gross profit for the tables is $26,000.

References

• University of Tennesse; Selling Price, Gross Margin & Mark-Up Determination; Rob Holland; September 1998
• Pacific Lutheran University; Income Statement; Gerald M. Myers; 2005