Gross Profit Percentage (Examples) | How to Calculate Gross Profit Percentage?

in this video on Gross Profit Percentage, here we discuss how to calculate gross profit percentage using its formula along with practical examples.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞?
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Gross Profit Percentage is a profitability measure that measures how much of every dollar of income is left over after the value of the goods sold (COGS) is paid off.

𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Gross Profit Percentage Formula = Gross Profit/Total Sales *100%

𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞
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Let us consider an example of a company called ABC Limited for calculation of gross profit. ABC Limited is in the business of manufacturing customized roller skates for both professional and amateur skaters. At the end of the financial year, ABX Limited has earned $160,000 in total net sales along with the following expenses.

Labour Wages - $60,000
Raw Materials Expense - $30,000
Factory Rent - $10,000

First we need to calculate cost of goods sold and gross profit.

Cost of Goods Sold = $60,000+$30,000+$10,000
COGS= $10,000

Gross Profit = Total Sales - COGS

=$160,000 -$10,000

=$60,000

Therefore, using above formula gross profit percentage is as follows,

Gross profit percentage = Gross profit / Total sales * 100%
= $60,000 / $160,000 * 100%
= 37.50%

To know more about the 𝐆𝐫𝐨𝐬𝐬 𝐏𝐫𝐨𝐟𝐢𝐭 𝐏𝐞𝐫𝐜𝐞𝐧𝐭𝐚𝐠𝐞, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:-

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