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Gross profit margin can also be used to set and monitor sales goals for your company. Because the costs of raw materials and labor all play a major part in gross profit margin it is imperative to revisit the bottom line in comparison to operational expenses. A change in suppliers, materials used, pricing structure labor and productivity are all factors that could change the profit margin ratio.
When cutting costs, there is almost always a tradeoff between achieving lower actual expenses and sacrificing something of value -- time, operational efficiency or staff energy, for example. It's important to analyze the total effect of cost cutting, examining the ripple effect throughout the organization for each cost reduction in terms of what is given up...
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