Gross Profit Margin Calculator
Calculate gross profit margin percentage, gross profit dollars, and gross margin ratio from revenue and cost of goods sold.
How to use this tool
- Enter total revenue and cost of goods sold (cogs) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your gross profit margin and the full breakdown beneath it.
Gross profit margin shows how much revenue remains after covering direct production costs. It is the foundation for covering operating expenses and generating net profit.
Formula
Gross Profit = Revenue − COGS
Gross Profit Margin (%) = (Gross Profit ÷ Revenue) × 100
How it works
This calculator subtracts cost of goods sold (COGS) from total revenue to find gross profit in dollars, then divides by revenue and multiplies by 100 to express gross profit margin as a percentage.
Gross margin measures how efficiently a business produces or delivers its product before accounting for operating expenses such as sales, marketing, and R&D. It is not the same as net profit margin; a company with a healthy gross margin can still be unprofitable if operating costs are high.
Worked example
Worked example
- Revenue = $1,000; COGS = $600.
- Gross profit = $1,000 − $600 = $400.
- Gross margin = ($400 ÷ $1,000) × 100 = 40%.
Gross profit = $400; gross profit margin = 40%.
Key terms
- Gross Profit
- Revenue minus the direct costs of producing or delivering the goods or services sold (COGS); the starting point for all profitability analysis.
- COGS (Cost of Goods Sold)
- Direct costs attributable to producing the goods or services sold, such as materials, manufacturing labour, and hosting costs for SaaS products.
- Gross Profit Margin
- Gross profit expressed as a percentage of revenue; shows how much of each revenue dollar remains after covering direct production costs.
- Net Profit Margin
- Profit after all expenses — including COGS, operating costs, interest, and taxes — divided by revenue; a more complete measure of overall profitability than gross margin.
- Contribution Margin
- Revenue minus variable costs (which may differ from COGS); used in break-even analysis and pricing decisions.
Frequently asked questions
- What is gross profit margin?
- Gross profit margin = (Revenue − COGS) ÷ Revenue × 100. It measures how efficiently a company produces goods or services. High gross margins (e.g., software at 70–90%) mean more money available for R&D, sales, and profit.
- What costs go in COGS?
- COGS includes direct materials, direct labour, and manufacturing overhead tied to production. It excludes selling, general & administrative (SG&A) expenses, R&D, and interest — those appear below the gross margin line.
- What is a good gross margin?
- Software/SaaS: 70–90%. Retail: 25–50%. Manufacturing: 20–40%. Service businesses: 50–70%. Compare against industry peers rather than a universal benchmark.