Business Math

Quarter 1 – Module 9:
Gross Margin on Sales
Business Math – Grade 11
Alternative Delivery Mode
Quarter 1 – Module 9: Gross Margin on Sales
First Edition, 2020

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 Business Math
Quarter 1 – Module 9:
Gross Margin on Sales
Introductory Message
For the facilitator:

Welcome to the Business Math – Grade 11 Alternative Delivery Mode (ADM)

Module on Gross Margin on Sales!

This module was collaboratively designed, developed and reviewed by

educators both from public and private institutions to assist you, the teacher or

facilitator in helping the learners meet the standards set by the K to 12 Curriculum

while overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and

independent learning activities at their own pace and time. Furthermore, this also

aims to help learners acquire the needed 21st century skills while taking into

consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the

body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this

module. You also need to keep track of the learners' progress while allowing them to

manage their own learning. Furthermore, you are expected to encourage and assist

the learners as they do the tasks included in the module.

For the learner:

Welcome to the Business Math – Grade 11 Alternative Delivery Mode (ADM)

Module on Gross Margin on Sales!

Business Math is a mathematical tool intended to deliver an utmost

understanding about money and information needed to make good financial
decisions. It does not only concentrate on the essentials of business finances, such
as owning or operating a business, but it also provides an avenue where people in
every walks of life learn the significance of managing their personal finances. Getting
familiar with the concepts of Business Math leads to making a better decision with
your money!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled into process
what you learned from the lesson.

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 What I Can Do This section provides an activity which will
help you transfer your new knowledge or skill
into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.

If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!

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 What I Need to Know

This module is made to help you establish a better understanding on the use
of gross margin on sales.

Our goal in this module is to help know how gross margin is related to sales
and how it affects one’s business.

At the end of this module, you are expected to:

1. Describe how gross margin is used in sales. (ABM_BMIIBS-Ih-4)

What I Know

DIRECTIONS: On a separate sheet of paper, write the letter that corresponds to your
answer to the following questions.

1. _____________ is the amount obtained from calculating the money left after
subtracting the sales to the cost of the goods sold.
A. Markdown C. Gross Margin
B. Mark-on D. Cost

2. The gross margin percentage is the result when dividing to amount of margin to
the ________.
A. Cost of the goods sold C. Mark-on
B. Profit D. Net sales

3. Why is tracking the gross margin necessary in the business?

A. To prevent losses
B. To generate Profit
C. To prioritize the cost and expenses that is needed to be paid.
D. All of the above.

4. A wood industry has a net sale of ₱900,000. The cost of the furniture sold is
₱750,000. How much is the gross margin?
A. ₱250,000 C. ₱150,000
B. ₱750,000 D. ₱900,000

5. What is the gross margin percentage in item number 4?

A. 16.67% C. 25%
B. 33.37% D. 21.87%

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6. A restaurant costs ₱50,000 to have a gross margin of ₱12,000. How much is the
cost of the items that were purchased in the restaurant?
A. ₱62,000 C. ₱42,000
B. ₱38,000 D. ₱50,000

7. What is the percentage of the gross margin?

A. 24% C. 33.31%
B. 31.58% D. 25%

8. RAA Incorporation has a net sale of ₱500,000. The costs for the items that were
sold is ₱390,000. Calculate the gross margin percentage.
A. 28.21% C. 22%
B. 24.44% D. 25%

9. In Baguio City, a strawberry farm has a total net sale of ₱80,000. The gross
margin is ₱18,000. How much is the cost of the strawberries that were sold?
A. ₱98,000 C. ₱69,000
B. ₱62,000 D. ₱88,000

10. What is the gross margin percentage of the strawberries?

A. 29% C. 25.5%
B. 25% D. 22.5%

11. The net sale of a drug manufacturing company is ₱325,000. The cost of each
drug sold is ₱265,000. Compute for the gross margin percentage.
A. 18.46% C. 34.767%
B. 24.53% D. 18.29%

12. A gadget store who sells smart tablets costs ₱200,000 for the units that were
sold. If the gross margin is ₱95,000. How much is the net sale?
A. ₱295,000 C. ₱205,000
B. ₱105,000 D. ₱200,000

13. Shena sells designer bags. The total net sale for the bags that she sold is
₱20,000. How much is the cost of the bags sold if the gross margin is ₱6,500?
A. ₱14,500 C. ₱26,500
B. ₱13,500 D. ₱42,000

14. Calculate the percentage of the gross margin in item number 13.
A. 33.3% C. 35.5%
B. 25.9% D. 32.5%

15. A company who sells calculators obtain a net sale of ₱235,000. The cost of the
calculator sold is ₱175,000. What is the gross margin percentage?
A. 34.29% C. 25.53%
B. 26.73% D. 18.21%

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 Good job on our pre-assessment!

This is just a preview of our lesson. More interesting

ideas will be introduced in this module.

Keep going!

Lesson

1 Gross Margin on Sales

Gross margin is one of the essential factors in tracking your business.

Calculating its percentage will help you determine if your business has enough
money left to pay administrative activities and other financial cost, and even gain a
profit.

What’s In

Before we start discussing our new lesson, let us have a short review on our
previous lesson on margin and mark-up.

DIRECTIONS: Read the problem carefully. On a separate sheet of paper, write your
answers to the questions below. Please do not write anything on the
module.

On an electronic shop, a printer is offered at ₱8,450.

1. Suppose that the cost of the printer

is ₱8,000, how much is the
mark-up?

2. What percent is the mark-up based

on the cost?

3. What is the rate of the margin?

4. If the owner’s margin is 8% of the selling price, how much is the cost?

5. What is the rate of the mark-up?

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 What’s New

DIRECTIONS: Listed below are some words. What comes to your mind when you see
these words? Write your impressions on a separate sheet of paper and
explain why. Then, look for the definition of these words.

GROSS MARGIN

NET SALES
COST OF
GOODS SOLD
PROFIT

Very good!

You will encounter these words in our discussion of the

gross margin.

Be ready to learn!

What is It

On our previous module, we have already discussed the margin. Margin is the
amount obtained after paying the cost of an item and its percentage can be derived
by dividing the margin to the selling price of the product.

Now, we will be focusing on margin particularly on Gross Margin wherein we

will be discussing its effect not just on a product, but to a company or a business
owner and how it is used in the business.

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 GROSS MARGIN ON SALES

What is Gross Margin?

Gross Margin is used to calculate the amount of money left from the company
sales after subtracting to the cost of goods sold (COGS). When we say sales, these
are quantities or amount sold, wherein the buyer receives a product or service in
exchange of money.

How is Gross Margin used in sales?

Gross margin dictates the track of your business. If the gross margin wildly
fluctuates, it may imply a poor sale product or a mismanagement of the business. It
is a strong indication that a significant change in the gross margin needs an
investigation to avoid a loss in the business.

The gross margin shows the amount that the business earns from the sales of
the product after deducting the cost of the goods sold. The amount of gross margin
may vary depending on the kind of the business industry. For example, Companies
who sell electronic downloads online and through websites may incur a higher gross
margin than those companies who have physical product since they have lesser cost.
Unlike companies which offers a physical product, they tend to use automobiles
which gives them a greater cost in manufacturing their product.

Suppose, Company A and Company B has the same product with the same
quality level. Company A manages to make their product at a lower cost than
company B. Therefore, Company A has a higher gross margin thus, giving Company
B a disadvantage in terms of the amount that they may earn. So, Company B decided
to adjust the selling price of his product much higher than Company A. This may
work in some cases, but it is risky since people tends to buy a product with a lower
price compared to a high-priced product with just the same level of quality.

GROSS MARGIN FORMULA

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 The gross margin formula is net sales minus the cost of the goods sold. It is
frequently expressed as percentage such as,

𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 − 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑡ℎ𝑒 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 − 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑

𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑥 100
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

EXAMPLE 1

A company’s net sales is ₱1,000,000, and a cost of goods sold that is ₱800,000.
Find the gross margin percentage.

𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = ₱1,000,000 − ₱800,000 = ₱200,000

₱1,000,000 − ₱800,000
𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑥 100 = 20%
₱1,000,000

Therefore, the company earns a ₱200,000 gross margin or a 20% gross margin
percentage.

EXAMPLE 2

Company ABC has a monthly sale of ₱250,000. The gross margin is ₱75,000.
Find the cost of the goods sold and the gross margin percentage.

𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = Net Sales − COGS

₱75,000 = ₱250,000 − COGS

COGS = ₱250,000 − ₱75,000

COGS = ₱175,000

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 ₱250,000 − ₱175,000
𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑥 100 = 30%
₱250,000

Therefore, the cost of the goods sold of the company is ₱175,000 and 30% gross
margin percentage.

That’s it! We’re done discussing the gross margin and

how it can be used in sales.

The following activities are waiting for you to answer.

What’s More

DIRECTIONS: On a separate sheet of paper, copy and complete the table below. The
first column is done for you. Round off your answer to the nearest
hundredths.

Company A Company B Company C Company D

Net Sales ₱80,000 ₱105,000 (3) ₱2,000,000

Cost of Goods
₱55,000 ₱85,000 ₱250,000 (5)
Sold

Gross Margin (₱25,000) (1) ₱60,000 ₱500,000

Gross Margin
(31.25%) (2) (4) (6)
Percentage

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 What I Have Learned

Excellent! Looks like the discussion above

gave you a better understanding of the week’s lesson.

Now, let me check if you can still recall the discussion on

margin on sales.

DIRECTIONS: On a separate sheet of paper, answer the following questions below.

1. On your words, define gross margin.

2. How is gross margin used in sales?

3. What is the effect of gross margin in a business?

What I Can Do

DIRECTIONS: Read and analyze the problem below. On a separate sheet of paper,
write your answers to the following questions.

Suppose you are a businessman who owns a big construction company. The
total net sale of your company is ₱560,000 with a ₱490,000 cost of the goods sold.

1. How much is your gross margin?

2. What is the gross margin percentage of your business?

3. You decided to make the price of your products higher and produce a margin of
₱100,000. How much is your net sales?

4. What is your gross margin percentage after the price adjustment?

Great! Now, let us see whether you really learned

something from our discussion by taking this evaluation.

Good luck!

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 Assessment

DIRECTIONS: On a separate sheet of paper, write the letter that corresponds to your
answer. Please do not write anything on the module.

1. The gross margin is used to calculate the amount of left from the sales after
subtracting to the _______________.
A. Profit C. Margin
B. Mark-up D. Cost of the Goods Sold

2. What does a decline in the gross margin mean?

A. There is a sudden decrease in the sales of the product.
B. The gross margin becomes higher than before.
C. The company is earning a high profit.
D. The company was able to maintain the profit of the business.

3. Which of the following can be the reason/s for the fluctuation of the gross
margin?
A. Poor sales item.
B. The product is in demand.
C. The company is earning a large profit.
D. The gross margin is stable.

4. The gross margin can be obtained through the formula _______ minus the cost
the goods sold.
A. Mark-up C. Cost
B. Net Sales D. Mark-on

5. What does a high margin imply in the business?

A. It implies that the business is at risk of losing.
B. It implies that the business is experiencing a lower demand.
C. It implies that the business is earning a good profit.
D. It implies that there is a significant problem in the business.

6. Companies who sell electronic downloads has __________ gross margins than
that of those companies who sell physical products.
A. Equal C. Proportional
B. Lower D. Higher

7. Company X and Company Y both offered a laptop with the same material and
specifications. Company X was able to manage a lower cost than company B.
Which of the two companies would likely to earn a higher gross margin? Why?

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 A. Company A, because they manage to have a low cost.
B. Company A, because they manage to have a high cost.
C. Company B, because they manage to make a larger margin by reducing
the price.
D. Company B, making the price of their products equal to their selling
price.

8. Company ABC has a net sale of ₱1,500,000 and a cost of ₱1,000,000 for the
cost of goods sold. How much is the gross margin?
A. ₱1,000,000 C. ₱2,000,000
B. ₱500,000 D. ₱1,500,000

9. In item 7, what is the rate of gross margin?

A. 50% C. 28.35%
B. 33.33% D. 24.44%

10. Ms. Judy owns a catering service. The net sales of her business is ₱70,000. The
cost of the goods is ₱50,000. Calculate the gross margin percentage.
A. 28.57% C. 25%
B. 33.33% D. 20%

11. A factory is manufacturing face masks. The net sale of the company is ₱350,000
and the cost of the face masks sold is ₱290,000. What is the gross margin
percentage?
A. 30% C. 17.14%
B. 25.87% D. 18.21%

12. An instruments store has a net sale of ₱400,000 with a gross margin of ₱80,000.
How much is the cost of the instruments sold?
A. ₱320,000 C. ₱420,000
B. ₱480,000 D. ₱500,000

13. In item number 12, compute the gross margin percentage.

A. 25% C. 30%
B. 50% D. 20%

14. The cost of the chairs that was sold is ₱500,000. The gross margin is ₱75,000.
How much is net sales?
A. ₱575,000 C. ₱175,000
B. ₱425,000 D. ₱625,000

15. What is the gross margin percentage in item number 14?

A. 18% C. 25%
B. 15% D. 20%

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 Additional Activities

DIRECTIONS: Read and analyze the problems below. Write your solutions and

answers to the questions on a separate sheet of paper. Please do not write anything

on the module.

1. A car company has a net sale of ₱59,000,000. The cost of the cars sold is

₱42,000,000.

a. How much is the gross margin?

b. What is the gross margin percentage?

2. The net sale of a supermarket is ₱10,000,000. The gross margin is ₱1,500,000.

a. How much is the cost of the items sold in the supermarket?

b. What is the gross margin percentage?

Congratulations!

We have successfully accomplished our mission

for this module!

I will see you in our next module!!

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Answer Key

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References
Lopez, B., Martin-Lundag, L. and Dagal, K., 2016. Business Math (Teacher's
Manual). Quezon City: Vibal Group, Inc.

Lopez, B., Martin-Lundag, L. and Dagal, K., 2016. Business Math (Textbook).
Quezon City: Vibal Group, Inc.

“Gross Profit Margin”, (Investopedia.com)

https://www.investopedia.com/terms/g/gross_profit_margin.asp.

“Gross Margin”, (AccountingTools.com)

https://www.accountingtools.com/articles/2017/5/9/gross-margin.

2020. https://pixabay.com/photos/printing-xps-xps-document-printer-4954790/.

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For inquiries or feedback, please write or call:

Department of Education – Region III,

Schools Division of Bataan - Curriculum Implementation Division
Learning Resources Management and Development Section (LRMDS)

Provincial Capitol Compound, Balanga City, Bataan

Telefax: (047) 237-2102

Email Address: bataan@deped.gov.ph

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