Gross profit means a firm’s revenue minus its cost of goods sold. The cost of goods sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses. It serves as the source for paying additional expenses and future savings. It is a financial metric used to access a firm’s financial health by revealing the amount of money left over from revenues after accounting for the cost of goods sold.
When analyzing a company, gross profit is so important because it directly indicates how efficiently management uses labor and supplies in the production process. Gross profit margin is gross profit as a percentage of revenue. Gross profit margin=(Revenue – COGS)/ Revenue. This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins. Contribution margin is a cost accounting concept that allows a company to determine the profitability of individual products.
It is calculated as: (Product Revenue – Product Variable costs) Thus, the contribution margin includes two parts- the fixed cost and the net profit. Contribution Margin Ratio=(Product Revenue – Product Variable costs)/ Product Revenue Contribution Margin Ratio is used to determine the range of products to be produced by the company. If the contribution margin ratio is unattractive, the management may decide to drop the unprofitable product from the portfolio in order to produce an alternate product with a higher contribution margin ratio.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more