Cost margin or gross margin

What is cost margin or gross margin?  To really understand cost margin, you just have to do the math.

Cost margin is total revenue minus cost of production divided by total revenue. The final number is multiplied by 100 to get the cost of margin percentage.

 

Here is the math. How to calculate cost of margin. Or gross margin.

Revenue from product = $8

Cost of production = $2

Cost margin = $8 - $2 = $6.00;

$6.00/$8.00 = $0.75 ;

0.75*100% = 75.0%

 

This means your gross margin or cost of margin is 75%. If the cost of production was $4, then your gross margin would be 50%.