Which of the following is essential for determining the profit margin of products sold?

Determining the profit margin is fundamentally tied to understanding the cost incurred to produce or purchase the goods sold. The cost of goods sold (COGS) represents all the direct costs associated with the production of goods that a company sells. This includes materials and labor costs directly involved in manufacturing the product.

To calculate the profit margin, the formula used is:

Profit Margin = (Sales Revenue - Cost of Goods Sold) / Sales Revenue

Therefore, without the cost of goods sold, it is impossible to accurately assess how much profit is generated from sales after accounting for the costs of those goods. This means that COGS is crucial for calculating the profit margin effectively.

While total sales figures, retail price, and operating expenses are all relevant in understanding overall financial performance, they do not directly provide the core information needed to determine the profit margin from products sold. The retail price is the amount customers pay, and total sales figures represent revenue, but without knowing how much was spent to acquire or produce those goods (COGS), the measurement of profit margins would be incomplete. Operating expenses relate to the broader costs of running a business but do not directly impact the margin on individual products.