09 November 2009
Dear siva, when we calculate gross profit as a percentage on cost, it is called gross profit on cost and is calculated as G.P./ COGS * 100. When the calculation is done with reference to selling price, it is called G.P. on sales and is calculated as G.P / sales *100. if you want the answer in fractionthen don't multiply by 100 (eg 1/3 or 1/4). example an item having the cost of Rs. 100 is sold at 20% profit on cost. we know, cost + profit = sales now, profit on cost = 100*20% RS. 20 therefore 100 + 20 = 120 hence profit on cost is 20% (or 20/100 i.e. 1/5 in fraction)and profit on sales is 16.67% (20/120 i.e.1/6 in fraction)
CAclubindia
