SERVE VS. GROSS PROFIT PERCENTAGE - The Beancounter (2023)

Is there a difference? Absolutely. Profit margin and gross profit percentage are not the same thing! Also, accounting for gross profit versus profit margin is different! A clear understanding and application of both in a pricing model can have a dramatic impact on results. Speaking of terminology, the markup percentage is the percentage difference between the actual cost and the selling price, while the gross profit percentage is the percentage difference between the selling price and the profit.

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In summary and how to calculate

SERVE VS. GROSS PROFIT PERCENTAGE - The Beancounter (1)

Example:

  • The item costs R$100.00 and retails for R$150.00.
  • The profit margin is R50 or 50% of the cost.
  • Gross profit is R50 but 33% of the selling price.

How to calculate:

  • Margin % = (sales price - cost price) / cost price x 100
  • Gross profit % = (selling price - cost price) / selling price x 100

Gross profit x profit margin chart

  • 15% profit margin = 13.0% gross profit
  • 20% profit margin = 16.7% gross profit
  • 25% profit margin = 20.0% gross profit
  • 30% profit margin = 23.0% gross profit
  • 33.3% profit margin = 25.0% gross profit
  • 40% profit margin = 28.6% gross profit
  • 43% profit margin = 30.0% gross profit
  • 50% profit margin = 33.0% gross profit
  • 75% profit margin = 42.9% gross profit
  • 100% profit margin = 50.0% gross profit

Beancounter offers outsourced accounting and tax services and can custom make a package as per your needs. Contact us today and make 2012 a great year for you and your business.

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