Calculating the Est. Gross Profit and Est. Gross Profit Percent when Discount is Applied

The standard formula in calculating the Estimated Gross Profit is as follows:

 

Sales –Est. Extended Cost = Est. Gross Profit

 

Where:

Sales = refers to the total quantity multiplied with the unit price of the item

Est. Extended Cost = based on the Cost Estimate Type of the item multiplied with total quantity of the item

 

While to get the Est. Gross Profit Percent, we use this formula:

 

Est. Gross Profit / Sales = Est. Gross Profit Percent

 

To better illustrate, take this example:

Item A

Quantity = 1

Sales Price = $ 15.00

Est. Extended Cost = $ 9.00

Est. Gross Profit = $ 6.00 ($ 15.00 – $ 9.00)

Est. Gross Profit Percent = 40% ($6.00 / $ 15.00)

 

In addition, the formula will vary if there is a discount applied to the transaction. The Est. Gross Profit will now be calculated based on the following:

 

Sales – Discount – Est. Extended Cost = Est. Gross Profit

 

Est. Gross Profit / (Sales – Discount) = Est. Gross Profit Percent

 

In the given example above and a discount for $2.00, we will get the following results:

Est. Gross Profit = $ 4.00 ($15.00 - $ 2.00 - $ 9.00)

Est. Gross Profit Percent = 30.77% ($ 4.00 / $ 13.00 ($15.00 - $ 2.00))