Question

Calculate the gross margin in both dollars and percentage for this swim department if net sales are $1,150,000 and cost of goods sold is $638,400.

Answer 1

The gross margin ratio is also known as the gross profit margin or the gross profit percentage.

The gross margin ratio is computed by dividing the company's gross profit dollars by its net sales dollars.

swim department net sales--------------------- $1,150,000

cost of goods sold -------------------------------- $638,400

This means its gross profit is $511,600 (net sales of $1,150,000 minus its cost of goods sold of $638,400) and its gross margin ratio is 44% (gross profit of $511,600 divided by net sales of $1,150,000).