Net profit margin

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Really stupid question.
I am having problems around identifying where Net profit margin % on cost is used against % profit on cost price. I am sure I am just being stupid.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Net profit margin

    not quite sure what you mean? :?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Net profit margin

    Gross profit margin is based on gross profit /sales

    Markup is based on gross profit / cost of sales.



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Net profit margin

    I am sorry I have not replied sooner I have been on annual leave.
    My query arose from a costing question.
    The cost of output was £ 12700 + net profit margin to which I answered £ 2540 = £ 15240.

    The correct answer was Net profit margin £ 3175 Total cost £ 15875.

    My problem is I do not know how to identify when production cost is a % of the total cost (net proft margin) as in above the production cost was 80%.
    I have now been told there is also a gross profit margin!

    I am sorry if these questions seem feeble to you.
    :oops:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Net profit margin

    Production cost is the cost price. I.e Purchases in the trading account.

    I am assuming that there was no opening and closing stock of finished goods, and therefore the production cost = the cost of goods sold.

    To work out the selling price which you have done correctly, we need

    gross profit and the profit margin % based on sales

    gross profit and profit markup% based on Cost of Sales

    if we are given pofit margin%,
    convert profit margin% to Profit markup %
    then using the Profit markup % to work out the Profit
    and add it to production cost to work out the selling price.

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