| N | |
| sales | 20,000 |
| cost of sales | 10,000 |
| operating expenses | 2,500 |
| expenses prepaid included in operating expenses | 500 |
A. 100%
B. 50%
C. 40%
D. 30%
Correct Answer:
Option B – 50%
Explanation
Gross profit margin is a financial metric used to assess a company’s financial health and business model by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). Gross profit margin, also known as gross margin, is calculated by dividing gross profit by revenues. Also known as “gross margin.”.
Gross Margin is generally calculated as the selling price of an item, less the cost of goods sold.
As a percentage, it can be calculated as:
Gross Margin (%) = (Revenue – Cost of goods sold) / Revenue * 100
revenue = 20,000
cogs = 10,000
20,000 – 10,000 = 10000 /20000 X 100 = 50%
