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This question is about gross sales vs net sales.
Does gross profit margin use gross sales or net sales?
The gross profit margin is calculated by using net sales. This is because you're looking at profits rather than just plain sales. Gross profit margin isn't a flat number like gross sales; it's a percentage.
The way to calculate the gross profit margin is to take your net sales and subtract the cost of goods sold (COGS) from that. That means you subtract the amount of money you made from the amount of money you spent to acquire the goods you just sold.
Then, you divide the solution to that by the net sales. You should get a decimal. Multiply that by 100 - that gives your percentage.
For instance, say that you made a net profit of $12,000. You spent $7,500 to acquire them, so you're COGS.
12,000 - 7,500 = 4,500
4,500/12,000 = .375
Your gross profit margin is 37.5%
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