Managing the Gross Margin Model Risk

Gross margin is nothing but the difference between revenue and cost of goods sold (COGs). COGs include all the expenses directly related to producing or delivering whatever it is that a company sells. Other costs are excluded from COGs. To assess the gross margin model risk, the following questions must be addressed:
§ How large is the spread between the price and COGs?
§ How should the margin be managed across the product line?
§ How sustainable is the gross margin?
Ref : John Mullins and Randy Komisar , “Getting to Plan B”, Harvard Business Press, 2009