Question

The following data is from the income statement of Ralston Company: Revenue$36,000 Cost of goods sold (14,400) Operating expenses (16,000) Net income$5,600 What is the company's gross margin percentage

Answer 1

60%

Step-by-step explanation:

Gross Margin Percentage =

[(Total Revenue - Cost of Goods Sold) / Total Revenue] x 100

Therefore, when the figures are substituted into the formula, we obtain:

[(36000-14400) / 36000] x 100 = 60%

In other words, gross margin is basically Gross Profit / Total Revenue expresses as a percentage.

Gross profit is a monetary value whilst gross margin is a percentage value. Both help to determine the amount available to be used to pay off other expenses such electricity, labour and rent. After which the net profit can be obtained.