Gross profit analysis is the differentiation b/w Cost of Goods that sold and sales value. As the observance of the standard gross profit figure or actual to the budgeted is extremely required, a careful study of surprising changes in gross profit is helpful to a corporation’s management. These variations or changes are the outcome of one or a mixture of the following.
- Variations in cost elements, i.e. labor, operating costs, supplies and materials.
- Variations in volume sold.
- Changes in the sales cost of the goods.
Gross Profit Analysis = Cost of Goods which sold - sales value