CN0703 - Calculation of Gross Profit Percentage by lindash


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									                                                                                   Site Financial Resources
                                                                                Level 13, Education Building
Site Finance Fact Sheet                                                                   31 Flinders Street,
                                                                                          Adelaide SA 5000
CN0703                                                                         For further support contact
                                                                                             1800 100 191
                                    Date Last Modified: February 2009

Calculation of Gross Profit Percentage

         It is imperative that the financial performance of all canteens be closely monitored to ensure
         costs are being met and anticipated gross profit achieved. A key indicator of the level of a
         canteen’s financial performance is the gross profit percentage.

         The calculation of a gross profit percentage will identify whether the required mark-up
         percentage has been achieved. If this percentage is monitored frequently, recommended
         once a term, this will enable the canteen to make changes to the mark-up percentage in a
         timely manner limiting the affect of under performance.

         The basis of the percentage calculation will be determined from the canteen’s Profit and Loss
         Statement at the chosen reporting date.

         Note: As the gross profit percentage is determined from the Profit and Loss Statement, it is
         essential that all revenue and expenses be included as at the reporting date. Entries that
         must be brought to account include:
            1. The recognition of inventory (stock). Refer to Fact Sheet “Recognition of Inventory
                (Stock on Hand)”
            2. Accounts Payable invoices not yet entered into EDSAS.
            3. Accounts Receivable invoices not entered into EDSAS for sales made on credit.
            4. Out-of-date/discarded stock. Refer to Fact Sheet “Stock Control”

         Calculating the Gross Profit Percentage
         Step 1: Print a Profit and Loss Statement for the required period.

             1. Finance Module/General Ledger/Reports/Profit & Loss Statement
             2. Enter level 3 and the period in which analysis is being performed (ie period when
                stock-take has taken place and information entered into EDSAS.
             3. Print the Profit and Loss Report.

         Step 2: Using the Profit and Loss Statement (Level 3) for the required reporting date enter the
                  required information into the following table:

              Sales (R-ZNA-6870)                                        $
              less Cost of Goods Sold including packaging
              Gross Profit                                              $
              Calculate Gross Profit Percentage
              (Gross Profit/Sales x 100)
              Identify Mark up Percentage
              (Using the Mark-up/Percentage Table)

                                                                                                  Page 1 of 2
                   Note: The above table and calculation are available from the following link ssonet/Site
                   Finance/Finance Fact Sheets/Gross Profit & Sales Analysis

                   Step 3: Compare the calculated gross profit percentage and subsequent mark up percentage
                           with the required percentages as determined at the beginning of the year.

                   Step 4: Where there is a variance between the actual mark up achieved and the required
                           mark up, consideration must be given to why the variance has occurred. A list of
                           factors is included with the spreadsheet.

                   Sales Analysis
                   In addition to the calculation of the gross profit percentage calculation, a sales analysis has
                   been included with the spreadsheet.

                   The purpose of the sales analysis is to determine whether the sales targets for the canteen
                   were met for an average week or day over a reporting period. Where a mark up percentage
                   variance has occurred the sales analysis will reflect the variance in dollars terms for an
                   average week or day. This will allow the users of the information to determine the severity in
                   dollars terms of the variance.

Finance Fact Sheet: CN0703 - Calculation of Gross Profit Percentage                                     Page 2 of 2
Site Financial Resources 1800 100 191

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