Gross Margin Calculator
Enter revenue and cost of goods sold to get the gross profit and gross margin, with the formula worked out.
A gross margin calculator works out the gross profit and gross margin percentage of a sale or product line from your revenue and cost of goods sold (COGS). It also works in reverse: enter a target margin and it finds the maximum COGS you can afford or the revenue you need. The calculator runs in your browser, is free, and needs no sign-up. Nothing you type is uploaded. The result updates as you type, so you can test different prices and costs before you commit to them.
Gross margin is the first profit line a business looks at: it shows whether products earn enough before rent, wages and other running costs. The calculator also shows the markup on COGS for the same figures.
How to use the Gross Margin Calculator
- Open the Solve for field and choose what you want to find: Gross profit and margin (from revenue and COGS), Maximum COGS (from revenue and target margin), or Required revenue (from COGS and target margin).
- Open the Currency field and choose your currency, such as USD, EUR or GBP.
- Type your sales for the period in Revenue (net sales), after discounts and returns.
- Type your direct costs in Cost of goods sold (COGS). Leave out rent, marketing and salaries.
- If you chose a solve mode that uses a target, type the percentage in Gross margin %, for example 40.
- Read the result lines: Gross margin, Maximum COGS, Required revenue, Gross profit, COGS as % of revenue, and Markup on COGS. Check any warning shown below them.
- Open How it was calculated to see the formula and each step with your own numbers.
To start quickly, press one of the example buttons at the top of the form, or press Reset to return to the starting example. Some fields sit under More options.
Under the result, Copy result copies the figures. Copy link saves the page address with all your inputs, so opening it restores the same result. Print / save as PDF prints the inputs, the result, the calculation steps and the date.
What is the gross profit margin meaning?
Gross profit margin is the share of your revenue that remains after you pay for the goods you sold. It is usually written as a percentage. A margin of 36% means that for every 100 of sales, 36 is left after COGS, and 64 went to the cost of the goods themselves.
What does gross margin percentage mean?
Gross margin percentage is another name for the same idea. It is gross profit divided by revenue, multiplied by 100. The word “ratio” is sometimes used for the same number before it is multiplied by 100, so a gross profit margin ratio of 0.36 and a gross margin of 36% describe the same thing.
Gross margin vs gross profit: what is the difference?
Gross profit is an amount of money. Gross margin is a percentage of revenue. If you sell for 250,000 and your COGS is 160,000, your gross profit is 90,000 and your gross margin is 36%. The same margin on a larger sales figure gives a larger gross profit, so the two numbers answer different questions.
What is the formula for gross profit margin?
Use these steps:
- Gross profit = revenue − COGS
- Gross margin = gross profit ÷ revenue × 100
With the example above: 250,000 − 160,000 = 90,000, and 90,000 ÷ 250,000 × 100 = 36%.
To work backwards from a target margin:
- Required revenue = COGS ÷ (1 − GM)
- Maximum COGS = revenue × (1 − GM)
Here GM is the target as a decimal, so 45% becomes 0.45. Because the margin is taken off a whole sale, a margin of 100% or more cannot be achieved with any cost of goods.
What counts as COGS?
COGS covers the direct costs of the goods you sold: materials, direct production labour, goods bought for resale and inbound freight. For a manufacturer it can also include production overhead. It does not include selling, admin or marketing expenses. Including those would lower your gross margin and hide how well your products earn money on their own.
How do I read the margin figure?
Gross margin differs widely by industry, so a figure is most useful when compared with businesses of the same type. A margin that looks unusually high is worth checking, because the calculator warns when it is, and a missing direct cost is a common cause.
How do you define gross margin and figure it by hand?
To define gross margin simply: it is the share of revenue left after the cost of goods sold. Figuring gross margin by hand takes two steps, and so does figuring out gross margin backwards from a target. The equation for gross profit is revenue − COGS; the formula for calculating gross profit margin (the gross profit margin equation) is gross profit ÷ revenue × 100. People also call it the GP margin and the gross profit the GP profit. A gross profit margin calc like this one simply does those steps for you, so you can determine gross margin for each product or for the whole business, and define gross profit margin targets for new lines.
Sources
- Gross profit and gross margin: OpenStax Principles of Accounting, Volume 1: Financial Accounting (free textbook).
- Every formula is worked through by hand in the tool’s tests (at least five reference cases per calculator).
Worked examples
| Input | Result |
|---|---|
| Revenue $250,000.00, COGS $160,000.00 | Gross profit $90,000.00, gross margin 36% (revenue $250,000.00, COGS $160,000.00) |
| Revenue $120,000.00, target gross margin 45% | Gross profit $54,000.00, gross margin 45% (revenue $120,000.00, COGS $66,000.00) |
| COGS $42,000.00, target gross margin 30% | Gross profit $18,000.00, gross margin 30% (revenue $60,000.00, COGS $42,000.00) |
| Revenue €48,500.00, COGS €31,200.00 | Gross profit €17,300.00, gross margin 35.67% (revenue €48,500.00, COGS €31,200.00) |
Calculated by the tool above with these values.
Frequently asked questions
Is gross profit percentage the same as gross margin?
Yes. Gross profit percentage is gross profit divided by revenue, multiplied by 100, which is the definition of gross margin.
What is a good gross margin?
There is no single good figure, because margins vary by industry. Compare your margin with businesses that sell similar products.
Can gross margin be negative?
Yes. If COGS is higher than revenue, the calculator shows a gross loss. A negative target margin means you would be selling below cost.
Why does the calculator say the margin is not possible?
A gross margin of 100% or more cannot be reached with a cost of goods. Enter a margin below 100%.
Why is markup on COGS not shown sometimes?
When COGS is zero, markup on COGS is not defined, so the calculator leaves it out.
Does gross margin include rent and salaries?
No. Rent, marketing and salaries are operating expenses, so they are not part of COGS. They are paid from the gross profit later.
Can I use the results in a price list or business plan?
Yes. Results may be used in commercial work such as price lists, quotes and business plans, with no attribution needed.
Related tools
- Profit margin calculator — profit, margin and markup from cost and price, or the price for a target margin.
- COGS calculator — cost of goods sold, gross margin and inventory turnover.
- Operating margin calculator — operating profit (EBIT), operating margin and EBITDA.
- Net margin calculator — net profit and net profit margin after all costs.
- Markup calculator — the price from cost and markup, or the markup between cost and price.
- Contribution margin calculator — contribution per unit, in total and as a ratio.