![]() ![]() ![]() The check is that Gross profit % = Gross Profit / Revenue = 128,571 / 428,571 = 30% Gross Profit = Revenue – Cost of goods sold If variable costs are 70% of revenue it follows that: This is demonstrated in the diagram below. So if gross profit is 30% of revenue, then cost of goods sold must be the remaining 70% of revenue. The gross profit formula tells us that Revenue = Cost of goods sold + Gross profit. Suppose a business knows that its cost of goods sold is 300,000 and its gross profit percentage is 30% and wants to find its gross profit. Revenue cogs how to#Gross Profit Formula Uses Gross Profit Formula UseĮxample of how to use the Gross Profit Formula The table below shows a few ways of rearranging the formula. The gross profit formula can be rearranged in numerous ways to provide useful information depending on what information is already known.įor example, if you only know the cost of goods sold and the gross profit percentage, you can calculate the revenue and the gross profit using the gross profit formula. Cost of Goods Sold used in Gross Profit FormulaĬost of goods sold is the costs associated with producing the goods which have been sold during an accounting period. Sales returns and allowances, and sales discounts are deducted to arrive at the sales revenue figure to use in the gross profit calculation. In accounting sales revenue refers to the monetary amount from the sale of goods and services in which the business normally trades and which were bought for the purpose of resale. Gross Profit (GP) = Revenue from Sales (R) – Cost of goods sold (COGS) Sales Revenue used in Gross Profit Formula ![]()
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