Gross Margin Rate tells you the percentage of revenue that exceeds the cost of of goods you've sold; in other words, it is the percentage of the selling price that is profit. The higher the margin rate, the more effective you are at generating income for each dollar you spend.
Gross Margin Rate = (Profit / Total Sales) * 100
Profit = Gross Sales - COGS
For example, Company X netted a revenue of $10,000 last month. The Cost of Goods Sold for last month's orders was $2,500, earning a profit of $7,500. To find the Gross Margin Rate, we divide our profit of $7,500 by the total revenue amount of $10,000, to return an amount of .75. We then multiply by 100% to produce a Gross Profit Margin Rate of 75%.
Updated about 1 year ago