how do you calculate gross profit 
gross profit is the difference between net revenue and the cost of goods sold total revenue is income from all sales while considering customer returns and discounts cost of goods sold is the allocation of expenses required to produce the good or service for sale the bottom lineby subtracting its cost of goods sold from its net revenue a company can gauge how well it manages the product specific aspect of its business gross profit helps determine whether products are being priced appropriately whether raw materials are inefficiently used or whether labor costs are too high gross profit helps a company analyze its performance without including administrative or operating costs 