Motor Retail Terminology and Concepts

Parts Gross Profit

Invoice Value of Parts Sales x Parts Cost of Sales

Guideline: See Parts Gross Profit %

Description:

This is the invoice value of the parts sold less the cost of those parts. Generally, this is expressed as a monetary value and also as a percentage of the total sales value.

The general accounting definition for any type of Gross Profit is simply sale less cost of sale and this statistic is no exception to the rule.

Example:

A) Parts Sales = R695,688
B) Cost of Sales = R507,852
C) Parts Gross Profit = R187,836 (A - B)

Discussion:

The trading strategy of your Parts Department will have an impact upon the value of profit that you make and will vary according to the amount of Trade Sales and the value of internal discount (if any) that your business conducts.

Before you get carried away with the value of Gross Profit that you are generating, use this statistic in conjunction with your Gross Profit % to ensure that your business is travelling in the direction that you want it to travel.

It is possible for the value of your Gross profit to show an increase whilst the Gross Profit % is declining. Make sure that you avoid the busy fool syndrome.

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