-=> On 11-09-08 13:18 ROSS CASSELL wrote to BOB KLAHN <=-


 BK>  And you aren't bright enough to figure out, if they make any
 BK>  profit at all on $2/gal, they are making 100%+ at $4/gal.

The ever-stubborn Klahnsman is still wrong.

 RC> I hope you wont mind my 28.5 years of retail experience dampen your
 RC> day, for none of your stubborness can negate it..

 RC> Profit margin is determined by dividing the cost by the retail.

Nope (see below).

 RC> Cost = $2

 RC> Sell = $4

 RC> $2 / $4 = 0.50

 RC> 50%

In this case, you got the gross profit margin of 50% correct, but only
by accident. Using your formula and example, if the cost went up from
$2 to $3, your formula  would calculate a higher gross profit margin
($3/$4 = 75%), which is clearly wrong, and going in the wrong direction.

Using your terms, and keeping it simple, the more correct statement of
gross margin for retail is Margin = (Sell - Cost) / Sell

So if you're buying reams of paper for $3 and selling them for $4, your
gross margin is ($4 - $3) /$4 = 0.25 = 25%.

And note that this is the gross profit margin, not the net.  For
the net, expenses such as rent, utilities, salaries and related
expenses, administration, warehousing, distribution, advertising, etc.
all have to be taken into account.  And if anything is left over after
taking those expenses out, the Govt. gets a big chunk in the form of
income taxes.

 RC> In my early days  I used to think the same as you, until I got shown
 RC> how the numbers crunching went on in bookeeping when I got shown how to
 RC> merchandise, order and plan.

Maybe it's time for a bit of a refresher course?  [;-D.

- - -  JimH.



... "This war is lost . . .." - Surrender-Monkey Harry Reid 4/19/07
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