If the gross target margin for a golf shop is 40%, what would be the target COGS?

To determine the target cost of goods sold (COGS) based on a gross target margin of 40%, it is essential to understand the relationship between gross margin and COGS. The gross margin represents the percentage of sales revenue that exceeds the cost of goods sold, indicating how much a business retains on sales before accounting for operating expenses.

If the gross target margin is 40%, this means that 40% of sales revenue is the gross margin retained by the golf shop, which leaves 60% of sales as the amount spent on the cost of goods sold. This can be derived from the formula:

Gross Margin = Sales Revenue - COGS

In terms of percentages, if you allocate 100% to sales revenue, and you know that the goal is to retain 40% as margin, the remaining percentage, which is COGS, would naturally be:

100% - 40% = 60%

So, the target COGS, expressed as a percentage of sales, would indeed be 60%. Understanding this relationship is crucial in facility management and financial analysis because it helps determine pricing strategies, inventory management, and overall profitability.