Question

Describe gross Profit Percentage?

Answer 1

Hint: For solving this question you should know about the Gross profit percentage. We will solve this problem by defining the gross profit percentage and then we will explain it and will tell about the mean of this. And then we will clear what a gross profit percentage is, with the help of an example.

Complete step by step answer:
So, according to our question we have to ask to describe the gross profit percentage.
If we see the definition of Gross profit percentage then the gross profit percentage is margin earned (in a form of percentage) on a product or service after applying the total production cost to the revenue earned. The total cost includes the cost of labour, and materials and overhead. So, the gross profit percentage helps to identify the probability of the organization’s products or services and is often time leveraged as a benchmark against competitors, or industry standards.
If we see the mean of the gross profit percentage then the gross profit percentage is an easy calculation to determine overall probability of an organization's competency when producing a good or service.
Now, if we find how the gross percentage used and how it is calculated then the gpp. calculated by the formula: \[100\times \left\{ \dfrac{Sales-\left( total labor+Materials+Overhead\operatorname{Cos}ts \right)}{Sales} \right\}\]
If we took an example: - Ram has a manufacturing company named A. He provides you following figures related to the year 2019.

Opening Stock	25,000
Purchase	3,00,000
Closing Stock	15,000
Sales	4,00,000
Direct Cost	20,000

To calculate the gross profit of a Company A, we will first calculate the cost of goods sold.
COGS = Opening Stock + Purchase + direct expenses – Closing Stock
           \[\begin{align}
  & =25,000+3,00,000+20,000-15,000 \\
 & =3,30,000 \\
\end{align}\]
Now, we know the sale is 40,000.
So, gross profit \[=4,00,000-3,30,000=70,000\]
And gross profit percentage \[=\dfrac{70,000}{4,00,000}\times 100=17.5%\]
Thus, we will calculate the Gpp.

Note: While solving these type questions you should know about the formula of the gross profit percentage. And find the gross profit with the help of that exact formula very carefully. Because if any term goes wrong here that will make our complete solution wrong.