Gross margin is the selling price of an item after taking out the cost of producing it. The formula for gross margin is revenue minus cost of goods sold divided by the revenue. This will give you the gross margin over the revenue period, as a percentage.
For example…
Chelsea had started a leather handbag manufacturing business last year. To calculate her gross margin, she got the key figures. This was her revenue of sixty thousand dollars and her cost of goods sold of twenty-five thousand dollars. Applying this to the formula to calculate gross margin – sixty thousand minus twenty-five thousand divided by sixty thousand gives a gross margin of fifty-eight percent. A great outcome!
