Difference Between Gross Margin and Contribution Margin: Learning Objectives: What is the difference between gross margin and contribution margin? Gross Margin is the Gross Profit as a percentage of Net Sales. The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The
Net Sales gross sales reduced by customer discounts, returns, freight out, and allowances.
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. Components: The basic components for the calculation of gross profit ratio are gross profit and net sales.Net sales means that sales minus sales returns. Gross profit would be the difference betweennet sales and cost of goods sold. Cost of goods sold in