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Sales are $1 million, COGS is 30% of sales, fixed costs are $200,000 which include depreciation...

Sales are $1 million, COGS is 30% of sales, fixed costs are $200,000 which include depreciation expense of $30,000, and interest expense is $20,000. What is the gross profit margin? (explain)

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Answer #1
Gross Profit is the company's total revenue - Cost of Goods sold (COGS). Cost of Goods sold (COGS) includes the direct costs in making the product like direct material and direct labor. The other expenses which are not a part of COGS are depreciation, other fixed costs, interest expense, taxes etc.
Gross Profit Margin = ((Revenue / Sales - COGS) / Revenue / Sales)
((1,000,000 - 300,000)/1,000,000)
((700000)/1000000)
Gross Profit Margin is 70%

Additional Information:

Items are listed as per the income statement format:

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