Gross profit is the difference between a company's revenue and its cost of goods sold (COGS). It is calculated by subtracting the total cost of producing goods or services, including direct labor, materials, and manufacturing overhead, from the total revenue generated from the sale of those goods or services.
The formula for calculating gross profit is as follows:
Gross Profit = Revenue - Cost of Goods Sold
Gross profit is an important financial metric for businesses as it helps to determine the profitability of a company's core operations. It is used to evaluate the efficiency of a company's production and pricing strategies and to determine how much money the company has left over to cover other expenses such as overhead and operating costs. Gross profit is also used to calculate the gross profit margin, which is the percentage of revenue that is left over after accounting for the cost of goods sold.
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