Dave Thomas has gathered the following information:
Gross sales $25000
Sales discounts $3000
Beginning inventory $2000
Net purchases $4000
Ending inventory $2800
Operating expenses $1800
Calculate Dave's gross profit.
Is this the same as the gross profit margin?
Two things initially: First, to answer one part of the question; some people mean different things by gross profit margin. They may mean just the gross profit or they might mean the percentage of the total income which is equal to the gross profit. Thus the question by Denis. Second, although it may have sounded abrupt and/or condescending, the other comment by Denis was keeping in the form of the 'rules' for posting
http://www.freemathhelp.com/forum/threads/54005-Read-Before-Posting
These 'rules' are really to see where you might need help. For example, do we have to start at some basic definitions or are you familiar enough with those that we can proceed directly to the actual solution where you need the help
So, now some basic definitions:
Gross profit is revenue minus your cost for producing the revenue, see
https://www.google.com/search?q=gro...la:en-US:official&client=firefox-a&channel=sb
for example.
Formally, the cost of revenue [cost of goods sold, or COGS, or just COG] are computed in slightly different ways depending on whether you actually make the goods you sell or just carry an inventory [you buy the goods you sell] or do both, see
http://en.wikipedia.org/wiki/Cost_of_goods_sold
for example In general, for this problem (no making of goods mentioned) we can define it as what we started with (beginning inventory) plus what we bought (purchases) minus what we had at the end (ending inventory)
Revenue is gross ['on paper'] income minus any discounts given.
Operating expenses (rent, heating & cooling, water, salaries, etc.) are used to compute net profit and we don't need to worry about that part of the question.
Enough of definitions: Revenue is 25 - 3 = 22 (numbers represent thousands of dollars); COG = 2 + 4 - 2.8 = 3.2, and gross profit = 22-3.2=18.8.
Gross profit margin is either 18.8 or 1880/22 ~ 85.5% depending on how you define it.
