If the gross target margin for your golf shop is approximately 40%, what would be the target percentage for your cost of goods sold?

To determine the target percentage for the cost of goods sold (COGS), it's important to understand the relationship between gross target margin and COGS. The gross target margin represents the portion of sales revenue that exceeds the cost of goods sold, essentially indicating how much profit you retain after covering expenses directly related to producing or purchasing the goods sold.

In this case, if the gross target margin is approximately 40%, it means that 40% of sales revenue is profit. Consequently, the remaining percentage must be the cost of goods sold. Since the total must equal 100%, you would calculate the COGS by subtracting the gross target margin from 100%.

This logic gives a COGS target percentage of 100% - 40% = 60%.

Thus, achieving a gross target margin of 40% necessitates that the cost of goods sold be around 60% of sales revenue. This understanding is fundamental in managing retail operations effectively, as it highlights the balance needed between pricing products and managing expenses in order to maintain a healthy profit margin.