Gross Margin

Gross Margin

Gross Income
Calculation: Sales less Direct Cost less Overhead(s).

Ratio: Gross Income as a percentage of Sales

Gross Margin is the percentage of profit available after deducting from sales the direct (or variable) costs of labor and materials, and the costs of the overheads applied to the production of goods and services.

This is a real What do you mean by that? with people sometimes using the two terms interchangeably. We use ‘margin’ to denote a percentage (of Sales).

- Sales of 200 less COS of 80 less factory overheads of 10 equals Gross Income of 110.
- Gross Income of 110 divided by Sales of 200 equals Gross Margin of 55%.

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