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Gross Profit Calculator

Find your gross profit and margin.

Result

$18,000.00
36.00%

How it is calculated

Gross profit is what is left of sales after the direct cost of producing or buying what you sold: gross profit = revenue − COGS. Gross margin turns this into a share of sales: margin = gross profit / revenue × 100. Revenue is the sales for the period and COGS (cost of goods sold) is the direct cost of those items, such as materials, direct labour or the purchase price of goods for resale. Both figures should cover the same period and the same currency. Revenue must be above zero; COGS is not validated, so a COGS larger than revenue gives a negative profit and margin. Overheads such as rent, marketing and salaries are not part of COGS, which is why this is called gross and not net profit.

Worked example

A shop sells goods worth 50,000 in a quarter, and the goods it sold cost 32,000 to buy. Gross profit is 50,000 − 32,000 = $18,000.00. To find the margin, divide by revenue: 18,000 / 50,000 = 0.36, which is shown as 36.00%. In other words, out of every 100 of sales, 36 remains to pay for rent, wages, marketing and the owner's profit after the cost of the goods themselves has been covered.

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Common mistakes

  • Mixing up margin and markup. A cost of 32,000 sold for 50,000 is a margin of 36% but a markup of 56.25%, because markup is divided by cost, not by revenue.
  • Including overheads (rent, advertising, office salaries) in COGS, which shrinks gross profit and mixes it with operating profit.
  • Using the purchase cost of all stock bought rather than just the cost of the items actually sold in the period.
  • Entering revenue including VAT or sales tax while COGS is without it, which inflates the margin.

Sources

About this calculator

This calculator works out gross profit and gross margin from revenue and cost of goods sold (COGS). Gross profit is simply revenue minus COGS, while gross margin expresses that profit as a percentage of revenue — the figure investors and lenders look at first when judging how efficiently a business turns sales into profit.

Small business owners use it to price products correctly, retailers use it to compare margins across product lines, and freelancers use it to check whether a project is actually worth taking on.

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Comments (1)

  • Editorial team

    Once you know your margin, you can run the idea backwards for pricing. To reach a target gross margin, divide the cost of goods by 1 minus the margin as a decimal. With COGS of 32,000 and a 40% target, the price would be about 53,333. Pricing is a decision, so test it against competitors and overheads. What margin do you aim for in your line of business?

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