how do I calculate total margin?
It says in the textbook total margin, the ratio of profit to the sum of revenues and non-operating gains... I'm confused...
what is the best formula to use? do I add the operating revenues to expenses.?/ please help thank you
To calculate the total margin, you need to have two key components: revenue and costs. The total margin represents the difference between the revenue generated from the sale of goods or services and the total costs incurred in producing those goods or services.
Here's the formula to calculate total margin:
Total Margin = (Revenue - Total Costs) / Revenue * 100
To calculate the total margin, we follow these steps:
1. Determine the total revenue: Add up the total amount of money generated from the sales of goods or services over a specific period. This could be obtained from your sales records or financial statements.
2. Calculate the total costs: Add up all the costs associated with producing or delivering the products or services. This includes the cost of raw materials, production costs, overhead costs, labor costs, and any other expenses incurred during the production process.
3. Subtract the total costs from the total revenue: Subtract the total costs obtained in step 2 from the total revenue obtained in step 1.
4. Divide the result by the revenue and multiply by 100: Divide the difference between revenue and costs by the revenue, and then multiply the result by 100 to express it as a percentage.
For example, let's say your company has generated $100,000 in revenue and has incurred $70,000 in total costs. Plugging these numbers into the formula:
Total Margin = ($100,000 - $70,000) / $100,000 * 100
Total Margin = $30,000 / $100,000 * 100
Total Margin = 0.3 * 100
Total Margin = 30%
So, in this example, the total margin is 30%.