How Do You Calculate A Blended Gross Profit Margin?
Gross profit is always revenues or sales minus the cost of goods sold (CGS). Investors and investment analysts look at gross profit as a proxy for how successful the business model is. The ratio is taken before operating costs, so management’s ability is not in question, only the business idea. The higher the gross margin, the more money the company makes from each raw sale. When companies have more than one business unit to account for, they will sometimes report a blended gross profit margin. Review the calculation for gross profit margin. Gross profit margin equals (sales – CGS)/sales. Determine the sales amount. You can find sales on the income statement for the company. This can be found on the annual report which is usually on the investor relation section of a company’s website. Let’s say Segment A has Sales of $50,000 and Segment B has sales of $100,000. Determine the CGS for each segment. This is also on the income statement, just under sales. Let’s say the CGS for Segment A i
