In a budgeted income statement, cost of goods sold is subtracted from sales to arrive at the gross margin.
<h3>What is gross margin?</h3>Net sales less the cost of products sold is known as gross margin. The profit made before deducting selling, general, and administrative (SG&A) expenses is represented by the gross margin. The ratio of gross profit to net sales is known as the gross margin or gross profit margin.
The gross profit margin formula,
Gross Profit Margin
= (Revenue – Cost of Goods Sold) / Revenue 100,
indicates the percentage ratio of revenue you keep for each sale after all costs exist deducted.
The ratio of revenue divided by the cost of goods sold is known as the gross margin. The gross margin is expressed as a percentage. It is often computed as the selling price of an item divided by the same selling price, less the cost of goods sold.
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