Gross margin is an important financial metric that represents the percentage of revenue retained after direct costs are incurred. However, there are times when businesses understand their costs and desired gross margin and thus need to determine how much revenue they should be making for their goods and services. Conversely, there are also times where businesses understand how much revenue they can make, as well as their desired gross margin, and thus need to understand their maximum cost. The latter scenario is fairly common in the services sector when attempting to understand the maximum hourly cost of a resource for a given revenue and gross margin.
The formula for gross margin is as follows:
This recipe demonstrates how to calculate gross margin when given a certain revenue and cost. In addition, this recipe demonstrates how to calculate...