This gross profit margin calculator shows what percentage of your revenue is left after the direct cost of producing your goods or services. Enter revenue and cost of goods sold (COGS) to see your margin instantly.
How Gross Margin Is Calculated
Gross profit is revenue minus the cost of goods sold — the direct costs of producing what you sell, such as materials and direct labor. The margin expresses that profit as a percentage of revenue, so you can compare products or periods of different sizes on equal footing.
Worked Example
Revenue of $100,000 with $60,000 in COGS gives $40,000 gross profit and a 40% gross margin. Every dollar of sales leaves 40 cents to cover operating expenses and profit.
Gross Margin vs Markup
- Margin is profit as a percentage of the selling price.
- Markup is profit as a percentage of cost — always a larger number for the same sale.
Gross margin only accounts for direct costs. To see profitability after rent, salaries, interest, and taxes, use the net profit margin.