Final answer:
Gross profit margin measures the amount of money from sales a company retains after paying for the direct costs of producing the goods sold, expressed as a percentage. For example, with Sally's gross profit margin of 68, her company retains $0.68 for every dollar in sales after covering production costs. As for the self-check question, the firm's accounting profit would be $50,000.
Step-by-step explanation:
The term gross profit margin refers to a key financial metric used to assess a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). To calculate the gross profit margin, you subtract the COGS from the total revenues and then divide this number by the total revenues. The resulting figure is then multiplied by 100 to express it as a percentage. For example, if Sally had a gross profit margin of 68, it suggests that for every dollar of sales, Sally's company retained $0.68 after covering the direct costs associated with producing her goods.
In the context of the self-check question, the firm's accounting profit can be calculated by subtracting the total expenses (labor, capital, and materials) from the its sales revenue. With sales revenue of $1 million and total expenses of $950,000 ($600,000 for labor, $150,000 for capital, and $200,000 for materials), the firm's accounting profit would be $50,000.