Question

What does service based business sell? How do we calculate its gross profit?

Answer 1

Solution. When an organization decides to come into service business, it needs to get deep study into different courses of action of management of the business in order to meet its general objective of earning certain profit level along with social impact in society.

In service based business, a company takes the process of rendering any form of subset recognizable facility and encompasses intangible products to its customers. It can involve dealing in rendering or usage of information, consultation, event management, infrastructure, media, etcetera and has largely developed and developing in today's time. It primarily aims to provide value to its customer in exchange of value for the services paid.

In case of service based business, cost of providing or meeting the expenses of service as provided by the company less the revenue it earns from customers through rendering the service activity during an accounting period. Gross Profit Margin is determined in the service based business by calculating gross income(total earnings-variable charges) and dividing by total earnings obtained.