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  • How to invert a profit margin to get a production cost?

How to invert a profit margin to get a production cost?

If you sell a product for £100 excluding VAT and make a gross profit of £25 on it, to express your gross profit into a purchase or production cost in percentage of sales, simply follow these steps:

  1. Start by dividing the gross profit by the turnover to obtain the gross profit margin rate: £25/ £100 = 25%
  2. To convert the gross profit margin into a cost expressed as a percentage of turnover, simply enter 1 - margin rate : 1 - 25% = 75%

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