Real gross profit ratio and standard gross profit ratio

Question

Is real gross profit ratio is bigger than standard gross profit ratio?

Answer 1

This is the question that we can’t resolve without getting real figure of gross profit and gross profit ratio. This is very simple to make any standard gross profit ratio. Assume that, I can guess gross profit ratio 20%. It is simple to compute however when real gross profit ratio is less than this, then our other planning might affect from this. At first, our net profit rate will affected and then the market value of company. Therefore, we can verify the variance of gross profit ratio only after computing gross profit ratio.