The importance of Gross margin Example 1: Sales price ok, sales volume ok compared to the size of the company: Sales income100 units x Variable expenses 100 units x Gross margin % - Fixed costs Profit %

The importance of Gross margin Example 2: Sales price too low, volume ok: Sales income100 units x Variable expenses 100 units x Gross margin % - Fixed costs Profit00 % Low Gross margin indicates that the sales price is too low compared to the variable costs (raw materials, production costs,…)

The importance of Gross margin Example 3: Sales price ok, volume too low: Sales income70 units x Variable expenses 70 units x Gross margin % - Fixed costs Profit ,5 % Low profit-% indicates that the sales price is too low compared to the variable costs, or that the sales volume is too low compared to the fixed costs.