Calculating Gross Profit Margin and Net Profit Margin

Tick each line you got. Your score builds from the marks on the scheme.

• subtracts cost of sales from revenue (150,000 - 90,000).1 mark
• correct answer for part (a) of 60,000 pounds.1 mark
• applies the formula (60,000 / 150,000) x 100.1 mark
• correct answer for part (b) of 40%.1 mark
• subtracts expenses from gross profit (60,000 - 36,000).1 mark
• correct answer for part (c) of 24,000 pounds.1 mark
• applies the formula (24,000 / 150,000) x 100.1 mark
• correct final answer for part (d) of 16%.1 mark

Nothing ticked yet - 8 available

Tick each line you got. Your score builds from the marks on the scheme.

• basic, undeveloped points made about the two ratios with little or no explanation of what the gap between them means.2 marks
• explains that the large gap between the ratios suggests high expenses relative to revenue, with some development, for example that most of the gross profit is being absorbed by costs such as rent, wages or marketing before reaching net profit.2 marks
• a developed answer explains the likely cause of the gap and suggests a specific, plausible action, reaching a supported judgement, for example that the business should review its expenses, rather than its cost of sales, which is already well controlled given the strong gross margin, to find savings.1 mark
• Specific content that earns credit: a high gross profit margin, 55%, shows the business controls the direct cost of sales well relative to its selling prices; a much lower net profit margin, 4%, shows that a large share of that gross profit is being used up by other expenses, such as rent, wages, marketing or administration costs, before it becomes net profit; a sensible next step is to review and try to reduce these expenses, for example by renegotiating rent, cutting non-essential marketing spend, or improving staff efficiency, rather than focusing on cost of sales, which is already comparatively well managed.1 mark

Nothing ticked yet - 6 available