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Gross profit is revenue minus the direct costs of producing goods or services (COGS). It represents the efficiency of production and pricing strategy. Gross profit margin = (Revenue − COGS) / Revenue × 100%.

Trinn-for-trinn guide

1. 1Identify total revenue for the period
2. 2Calculate COGS: direct materials, direct labour, and direct overheads
3. 3Gross profit = Revenue − COGS
4. 4Gross margin % = Gross profit / Revenue × 100

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