 Calculating Gross Profit. - Community Clubs Victoria Categories

# Calculating Gross Profit.

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Reviewing your profit margins regularly is good practice.   Clubs need to be mindful of products pross profit (GP) margins and can utilise the following formula to calculate the GP percentages:

Gross Profit Margin = (Retail price – Cost price ) X 100%

Retail price

For example, when selling a packet of potato chips that has a cost price of \$1.00 and a retail price of \$1.80

\$1.80 – \$1.00  x 100% = 44%

If you need to achieve a minimum Gross Profit margin of say 44% you cannot do this by simply multiplying the cost price by 44% and adding this to the cost price.  This is a common mistake and using the example below would give an incorrect result.

\$1.00 + 44% = \$1.44

Using the correct GP calculation we can see that this only represents a Gross Profit Margin of 30.5%

\$1.44 – \$1.00  x 100% = 30.5%

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