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<p>Gross profit margin is calculated on?</p> <p>1- Based on Sales</p> <p>2- Based on Cost of Sales</p> <p>3- Based on Assets</p> <p>4- Based on Capital</p>
gross proft / revenue
sales and cost of goods sold
1 sales
Also cost of sales
Gross profit margin is calculated on or based on sales and cost of goods sold.
Based on Cost of Sales
1- Based on Sales
Gross profit = (Sales value - (Direct Materials+Direct Labour+Direct Overheads)
Gross profit margin = Gross Profit / Sales value x100 is expressed as a %age.
There is an interpretation on what is Sales value. On a conservative note, Sales value must be (Gross sales - sales returns - discounts and rebates - freight on delivery).
It is based on sales and cost of goods sold
1- Based on Sales
It is based on sales.
sales
Sales or revenue after adjusting the direct expenses like cost of goods sold
