Module 7 • Control Step 2 Gross profit percentage


Calculate the gross profit percentage for each product or group of product separately. CDs


DVDs


Gross profit × 100 Sales


1


= R90 R180


= 50% Step 3


Determine which percentage of the sales the specific product or group of products accounts for. This is very difficult – especially for the new business person. Existing businesses can use the figures from previous years or months. Therefore, in most cases it will be an estimated figure.


Calculation – Explanation Supposing you sell, on average, 30 units of product A, 15 units of product B and 20 units of product C. Which percentage of sales does each account for? Add together all the units sold – that is the grand total. Now determine which percentage of total A, B and C accounts for.


Percentage =


15 (A) 65


×


100 1


= ±23%


Now calculate the percentage of sales for B and C. Important: Add the three answers together – it must add up to 100 exactly. It will always be like that.


Step 4


Calculate the Weighted Average Gross Profit Percentage This is calculated by multiplying the sales percentage 1 by the Gross Profit Percentage 2 of each individual product. Then add the different answers together 3 . The answer is your Weighted Average Gross Profit Percentage 4 .


Sales 1 × CDs DVDs 60% 40%


Weighted average gross profit percentage is 3 30% (CD)


+ 3 16% (DVDs) = 50% 40% Gross profit 2


Weighted gross profit 1 × 2 = 3 =


30% 16%


× 100 1


Gross profit × 100 Sales


1


= R100 R250


= 40%


× 100 1


46% 4


137


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