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  4. How do I Calculate Gross Margin
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  2. MikesBikes Introduction
  3. Year 1
  4. How do I Calculate Gross Margin

How do I Calculate Gross Margin

Gross Margin (gross profit) is how much your firm earned this year by making
bikes and selling them.

Gross Margin Calculation

Gross Margin = (Sales Units x Average Wholesale Price) – (Sales Units x Average Unit Cost)

Gross Margins from the Product Summary report

 

Your firm may also use Gross Margins to determine how much money you have left over from sales to cover other operating expenses.

Note

The Gross Margin amount does not include the following costs: Inventory Costs, Product Marketing costs, and Product Development costs.

What if I have a negative Gross Margin?

A negative Gross Margin means that your per unit costs are higher than your wholesale price and that your product is running at a loss.

There are three things that you can do to increase your Gross Margins:

Keep in mind that extreme changes to the above may have a negative effect on your Gross Margins.

 

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