How to Calculate Blended Margin
Blended margin is a financial term used to describe a look at multiple profit margins for a company or group of companies. Gross profit margin is the amount of money a business makes after the expenses for production have been subtracted. Blended margin gives a type of average of multiple profit margins. This calculation is useful for indicating the financial status of a specific company or similar group of businesses.
Figure the gross profit margin for each company or for each product within a company by subtracting the cost of goods sold from the amount of money made (revenue). Then divide this figure by the revenue. For instance, if a company made £32,500 selling paper and spent £6,500 in the process of making the paper, subtract £6,500 from £32,500 to get £26,000. Then divide £26,000 by £32,500 to get a gross profit margin of 0.8.
Add the gross profit margins for multiple products or companies. For instance, if the gross profit margins for three separate companies were 0.8, 0.7 and 0.9, add these figures to get 2.4.
Divide this figure by the number of gross profit margins analysed to get the blended margin. For instance, 2.4 divided by 3 would equal a blended margin of 0.8.