Calculating Gross Profit

Reviewing your profit margins regularly is good practice.   Clubs need to be mindful of products gross profit (GP) margins and can utilise the following formula to calculate the GP percentages:

Gross Profit Margin = (Retail price – Cost price ) X 100%

 Retail price

For example, when selling a packet of potato chips that has a cost price of $1.00 and a retail price of $1.80

$1.80 – $1.00  x 100% = 44%

 If you need to achieve a minimum Gross Profit margin of say 44% you cannot do this by simply multiplying the cost price by 44% and adding this to the cost price.  This is a common mistake and using the example below would give an incorrect result.

$1.00 + 44% = $1.44

Using the correct GP calculation we can see that this only represents a Gross Profit Margin of 30.5%

$1.44 – $1.00  x 100% = 30.5%