Gross Profit Calculator
Subtract cost of goods sold from revenue to get gross profit and gross margin — the money left to cover overhead and profit.
How it works
Gross profit = revenue − COGS · Gross margin % = gross profit ÷ revenue × 100
Gross profit is what remains after the direct cost of producing your goods or services, and it is the money left to pay overhead, salaries and, ultimately, profit. It sits at the top of the income statement above operating expenses, so it isolates how efficiently you produce, separate from how you run the rest of the business. A thin gross margin caps everything below it — no amount of cost-cutting on overhead can rescue a product that barely clears its own cost.
Worked example
A business books $200,000 in revenue and spends $130,000 on cost of goods sold. Gross profit is 200,000 − 130,000 = $70,000, and the gross margin is 70,000 ÷ 200,000 = 35%. That 35% is what is available to cover everything else and still leave a profit.
Frequently asked questions
What is the difference between gross profit and net profit?
Gross profit subtracts only the direct cost of goods sold. Net profit goes further and subtracts operating expenses, interest and taxes, so it is always lower and reflects what the business actually keeps.
What belongs in COGS?
The direct costs of producing what you sell — materials, direct labor and manufacturing costs. Rent, marketing, admin salaries and other overhead are operating expenses, not COGS.
Is a higher gross margin always better?
Generally yes for a given industry, but margins vary enormously between sectors. A grocer thrives on single-digit margins through volume, while software routinely exceeds 70%. Compare against peers, not a universal target.
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Educational estimate, not financial advice.