Quote: kinleycat "My favourite from work this one.
When explaining gross profit, a doubling of profit is only 50% not as you would think 100%.
if you start off with £1 and add on 50% GP you come up with £2, however if you were starting off with £1 and you were adding on vat if that were 50% (it probably will be soon!) you would only have £1.50.
I have asked for an answer to this conundrum for about twenty years and I have never once got an acceptable answer!!!!'"
I can answer this for you.
Gross profit is like margins. A 50% margin means 50% of the total price is profit. eg you pay £1 for something and sell it for £2. Therfore 50% of the selling price is profit.
Also you cannot sell something at 100% margin unless you paid nothing for it. As all of the sale price needs to be profit.
To work out margins or gross profit you use the following calculations.
50% margin divide cost price by 0.5
60% margin divide cost price by 0.4
70% margin divide cost price by 0.3 and so on.
Profit percentage is different as if you pay £1 for something and sell it at 50% profit percentage you sell it at £1.50.
Hope this helps.
