What is gross profit equal

If you are from the Gross profit speaks, the fixed costs have not yet been deducted from the profit. The Gross profit is identical to the term contribution margin. A Gross profit per unit represents a specific contribution margin. And the sum of all contribution margins is then referred to as gross operating profit. In cost accounting, the Gross profit the difference between the variable cost and the price of a product.

On the other hand, the difference between the sales price and the purchase price can also be used in the trade calculation as Gross profit describe. According to the Commercial Code, the Gross profit the raw result. This represents the interim result in the income statement. In the case of small and medium-sized companies, the P&L can be simplified and start with the gross profit. In addition to sales, this also includes other operating income.

The contribution margin or Gross profit is the portion of the revenue that is used to cover fixed costs. The part that goes beyond covering the fixed costs is then the profit. The contribution margin is used to control the production program. The sum of the contribution margins ensures that a sufficient return is achieved for the capital employed. This should always be examined by the entrepreneur after setting up a business in order to be able to run a successful company.