Gross Margin Calculator
Turn revenue and cost of goods sold into gross profit, gross margin and the equivalent markup — the top line of profitability.
How it works
Gross profit = revenue − COGS · Gross margin % = gross profit ÷ revenue × 100 · Markup % = gross profit ÷ COGS × 100
Gross margin is gross profit as a share of revenue, where gross profit is revenue minus the cost of goods sold (the direct costs of producing what you sell). It is the profitability of the product itself, before operating expenses, salaries, marketing and taxes. Because margin measures profit against the larger revenue figure, it is always a smaller percentage than the markup, which measures the same profit against cost.
Worked example
On $50,000 of revenue with $30,000 of COGS, gross profit is $20,000. Gross margin is 20,000 ÷ 50,000 = 40%, while the same $20,000 measured against the $30,000 cost is a 66.7% markup.
Frequently asked questions
What is the difference between gross margin and net margin?
Gross margin subtracts only the cost of goods sold. Net margin also subtracts operating expenses, interest and taxes, so it is always lower. Gross margin shows product profitability; net margin shows what actually reaches the bottom line.
What counts as cost of goods sold?
COGS is the direct cost of producing or buying the goods you sold — raw materials, direct labor and manufacturing costs. It excludes overhead like rent, marketing and administrative salaries, which fall below the gross-profit line.
What is a good gross margin?
It varies enormously by industry: grocery and hardware run thin single-to-teens margins, while software and luxury goods can exceed 70–80%. Compare against typical margins in your own sector rather than a universal target.
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Educational estimate, not financial advice.