Join Rudolph Rosenberg for an in-depth discussion in this video Using standard costs to calculate gross margin, part of Financial Analysis: Analyzing the Bottom Line with Excel.
…At this point we know how to calculate standard cost for…each of our products and services.…As we saw earlier,…standard costs along with revenue are the key components of gross margin.…By calculating revenue minus standard costs, we calculate our gross margin for…each of our products we sell.…Simply put, if we have a product such as a pen that is sold for $5, and…we have a standard cost of $2, then our gross margin is equal to $3.…
Now there are two ways for us to use that information in a useful way.…The first one is to know at which price we need to sell our products.…Since we know how much it costs us to produce the good,…we know the price point below which we would lose money.…In our previous example, we know that we can not sell our pen for less than $2.…Otherwise, it would cost us more money to produce it than we would get from…selling it, which does not make sense from a profitability standpoint.…However, we're still missing pieces of information to know at what price we…should sell.…
And we will cover that later in the course.…
Also check out the companion course, Financial Analysis: Analyzing the Top Line with Excel.
Lynda.com is a PMI Registered Education Provider. This course qualifies for professional development units (PDUs). To view the activity and PDU details for this course, click here.
The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.
- Finding data points
- Prepping data
- Calculating standard cost and gross margins
- Analyzing overall gross margin performance
- Analyzing individual and overall expenses