Editing Profit margin (section)

=== Gross profit margin ===
Gross profit margin is calculated as gross profit divided by net sales (percentage). Gross profit is calculated by deducting the cost of goods sold (COGS)—that is, all the direct costs—from the revenue. This margin compares revenue to [[variable cost]].
Service companies, such as law firms, can use the cost of revenue (the total cost to achieve a sale) instead of the cost of goods sold (COGS). It is calculated as:<!-- --><math display="block">\text{Gross Profit} = \text{Revenue} - (\text{Direct materials} + \text{Direct labor} + \text{Factory overhead})</math>
<!-- --><math display="block">\text{Net Sales} = \text{Revenue} - \text{Cost of Sales Returns} - \text{Allowances and Discounts}</math>
<!-- --><math display="block">\text{Gross Profit Margin} = {100 \cdot \text{Gross Profit}\over\text{Net Sales}}</math>

'''Example.''' If a company takes in a revenue of $1,000,000 and $600,000 in COGS. Gross profit is $400,000, and gross profit margin is (400,000 /.                        1,000,000) x 100 = 40%.