What is Gross Additional Markup?
Gross additional markup (GAM) is an accounting term that refers to the amount of money a company adds to its cost of goods for the purpose of achieving a desired level of net profit. This markup is typically applied to the cost of materials, labor, overhead, and other costs associated with producing a product or providing a service.
Examples of Gross Additional Markup
Gross additional markup can be applied in a variety of different ways. Here are some examples:
- Retailers often apply a markup on the cost of the goods they purchase from a wholesaler in order to make a profit.
- Manufacturers may add a markup to their manufacturing costs in order to ensure they make a certain amount of profit on the finished product.
- Service providers may apply a markup to cover their overhead costs and to ensure a certain level of profit.
- A contractor may add a markup to the cost of labor and materials in order to make a profit from the job.
Benefits of Gross Additional Markup
Gross additional markup has several benefits for companies. It allows companies to set a desired level of profit and provides them with a way to control their costs. This can help companies stay competitive, as they can adjust their markups to account for changes in the market. Additionally, it allows companies to ensure that they are pricing their products or services appropriately.
Conclusion
Gross additional markup is a common accounting practice that can help companies ensure they are achieving their desired level of profitability. It is important to understand how to properly apply a markup and to ensure that the markup is applied in a way that is fair and reasonable. For more information, please refer to the following resources:
- Gross Additional Markup from Investopedia
- Gross Additional Markup from Quickbooks