Gross profit margin
Gross profit margin expresses gross profit as a percentage of revenue: gross profit ÷ revenue × 100%. Gross profit is revenue less cost of sales. The margin helps assess pricing, purchase costs and sales mix, but comparisons require consistent cost classifications. It is also used to reconstruct sales or cost of sales in incomplete-records questions.
Worked example
Sales of $100,000 and cost of sales of $70,000 give gross profit of $30,000 and margin of 30%; the corresponding mark-up is 42.9%.
Common mistake
A 30% margin means cost is 70% of sales. It does not mean sales are 130% of cost.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA2 | Supporting | Official assessment-window verification pending |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Gross margin