Gross Profit

Gross profit represents profit after only direct expenses (COGS) have been accounted for:

Gross Profit = Net Revenues – COGS

7. Calculating Gross Profit
Exercise
Q1:Tire manufacturer recorded $100m in net revenues:

  • $40m in costs for rubber

  • $5m in shipping rubber to its plant

  • $20m in costs for office supplies

Calculate gross profit.

7. Calculating Gross Profit
Solution
1:
Gross profit = Net Revenues – COGS = $55m
$20m in office supplies are not COGS.
Gross Profit Margin (GPM)
Gross profit margin is expressed as a % and calculated as:
GPM = Gross Profit/Revenues

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