Gross margin is the difference betweenrevenue from the sale of goods and variable costs. Sometimes use the definition of "marginal income". This calculated indicator does not allow to characterize the financial condition of the company, however it is necessary when calculating many indicators.
So, the ratio of marginal income to the amountThe revenue received from the sale of goods determines the gross margin ratio. The variable costs include the cost of materials and raw materials for the main production, the cost of sales, wages of the main production workers, etc.
Costs (variables) are directly proportional to volumeproduction. The company is interested that the costs per unit of output are lower, as this allows you to get more profit. With a change in the volume of release of goods, costs increase (decrease), respectively, but they have a constant constant value per unit of output.
Proceeds from sales are calculated from the accounting of all receipts that are associated with the calculations, expressed in kind or in cash, for goods, services, work or property rights.
Gross margin shows the contribution made by the company for profit and to cover fixed costs. The gross margin is determined in two ways.
In the first case, from the company's revenue receivedfor goods sold, subtract any direct costs or variable costs, as well as part of the overhead (overhead) costs that are variable and depend on the volume of production. In the second way, gross margin is calculated by adding the company's profit and fixed costs.
There is also such a thing as meangross margin. In this case, the difference between price and average cost (variable) is taken. This category shows how a unit of a product contributes to profit and how it covers fixed costs.
Under the norm of gross margin understand the proportion of the magnitudeincome margin in revenue, or for a single product - the share of income in the price of the product. These indicators allow to solve various production problems. For example, using the described coefficients, you can determine the profit for different production volumes. To better understand the economic meaning of the gross margin indicator, the following problem can be considered.
Suppose a manufacturing company releases andsells goods for the production and sale of which has average variable costs in the amount of 100 rubles per unit. The very same product is sold at a price of 150 rubles per unit. The fixed costs of the company are 150 thousand rubles a month. It is necessary to calculate what profit the company will have per month if sales amount to 4000 units, 5000 units, 6000 units.
At the first stage of the decision it is necessary to determinewhat value the gross margin and profit will take for each option, since fixed costs do not depend on the volume of production. The profit of the enterprise can be determined at any volume of production. To do this, it is necessary to multiply the average gross margin by the volume of production, the result will be the total marginal income.
Further, from the total value should take away the fixed costs. As a result, it turns out that the company's profits will be 50, 100 and 150 thousand, respectively, for each case.
From the example shown, you can see thathigher profits can be achieved by increasing gross margin. To do this, reduce the sales price and increase sales, or reduce fixed costs and increase sales, or proportionally change costs (fixed and variable) and output.
