Explain Gross margin

Question

Explain Gross margin with their appropriate formulas?

Answer 1

Gross margin is mostly used word in accounting region for showing the growth of companies. This is total profit ratio. In easy words, it is gross profit divided by the net sales. Gross profit is surplus of net sales over cost of goods sold. Grosser margin means more capacity to cover our entire indirect cost.

Formula of Gross margin = Sales – Cost of Goods sold/Sales

Gross margin % on Sales = (Sales – Cost of Goods Sold)/Sales X 100

Gross margin % on Cost = (Sales – Cost of Goods Sold)/COGS X 100

Cost of Goods Sold = Opening stock of material + purchase + Direct Expenses – Closing stock