Indeed, in ‘those’ examples, they are both losses.

Cheers,
Gil

thank you for your response of March 8, 2010 at 10:03 am to my earlier query of the same date.

is it correct to assume that both of the Net Profit figures in your response calculations are LOSSES?

Net Profit $600.00 is this a Net Profit figure a LOSS?
Net Profit Margin -0.80%
and
Net Profit $1,850.00 is this Net Profit figure, also a LOSS?
Net Profit Margin -2.96%

Thank you,
Tariq

Thanks for your question.

Ok so. The confusion comes from this.

You say 20% GP of 75000.00 = 1500.00
(75,000.00 X 20%)

Or – your revenue (75,000) X 20%

This is a ‘markup’ calculation, not a margin calculation. Margin is what you need to use.

However, your math is correct if you use a 20% markup, here are the results.
(sorry for the weird formatting .. I am unable to insert nicely formatted tables here)

Sales (Revenue) Month

Quantity Sold 50

Selling Price $1,500.00

Total Sales (Revenue) $75,000.00

Gross Profit

Cost of goods per unit $1,200.00

Total cost of goods sold $60,000.00

Gross Profit $15,000.00
Gross Profit Margin 20.00%

Expenses

Facilities Cost $2,000.00
Phone Bill $300.00
Hydro Bill $200.00
Insurance Costs $100.00
Shipping Fees $500.00

Commissions Paid (10%) $7,500.00
Staff Salary $5,000.00

Total Expenses $15,600.00

Net Profit $600.00
Net Profit Margin -0.80%

Now look at this example (below) which is the math I used.
Both are correct. They are simply applying different calculations to different sides of the ledger.
Hope this makes sense
Cheers,
Gil
P.S. Also be sure to read – http://www.synaptici.com/2009/the-difference-between-margin-and-markup/

Sales (Revenue) Month

Quantity Sold 50

Selling Price $1,250.00

Total Sales (Revenue) $62,500.00

Gross Profit

Cost of goods per unit $1,000.00

Total cost of goods sold $50,000.00

Gross Profit $12,500.00
Gross Profit Margin 20.00%

Expenses

Facilities Cost $2,000.00
Phone Bill $300.00
Hydro Bill $200.00
Insurance Costs $100.00
Shipping Fees $500.00

Commissions Paid (10%) $6,250.00
Staff Salary $5,000.00

Total Expenses $14,350.00

Net Profit $1,850.00
Net Profit Margin -2.96%

I just wanted to know how the loss of $1,850 was worked out on 20% Gross Profit Margin in your example 1 above.

My calculation gives a different figure: 20% Gross Profit (of $75,000) = $15,000 – $15,600 (total expenses) = $600 LOSS.

Could you please explain how did you workout the loss figure of $1,850. Thank you.

Thanks for your feedback and you kind words. I am happy it helped!
Have a great weekend.
Cheers,
Gil