Gross Profit Calculator (Gross Margin)
Gross profit is revenue minus the cost of goods sold (COGS); gross margin is gross profit divided by revenue. With 50,000 of revenue and 30,000 of COGS, gross profit is 20,000 and gross margin is 40%. Subtract operating expenses from gross profit to get operating profit and operating margin.
Enter revenue and the cost of goods sold for a product, a month or a year to get gross profit, gross margin and markup in any currency. Add operating expenses to see operating profit too, or start from a target gross margin to find the revenue you need.
Gross profit formula
Gross profit = revenue − cost of goods sold. Gross margin (%) = gross profit ÷ revenue × 100. Markup (%) = gross profit ÷ COGS × 100. Operating profit = gross profit − operating expenses. Revenue for a target gross margin = COGS ÷ (1 − margin ÷ 100).
Worked example
| Case | Result |
|---|---|
| Revenue 50,000.00, COGS 30,000.00: gross profit | 20,000.00 |
| Gross margin | 40.00% |
| Markup on COGS | 66.67% |
| Operating expenses 12,000.00: operating profit, operating margin | 8,000.00, 16.00% |
| COGS 30,000.00 at a 50% target gross margin: revenue needed | 60,000.00 |
Gross profit vs operating and net profit
Gross profit shows what your products or services earn before overheads. Operating profit also pays for salaries outside production, rent, software and marketing; net profit subtracts interest and tax as well. If gross margin is healthy but operating margin is thin, look at overheads; if gross margin itself is low, look at pricing, discounts and supplier costs.
Gross margin vs contribution margin
Contribution margin subtracts every variable cost, including sales commissions, payment fees and delivery, not only the cost of goods sold: contribution margin = revenue − variable costs, and the contribution margin ratio = contribution margin ÷ revenue. A product sold for 50.00 with 30.00 of variable costs contributes 20.00 a unit, a 40% ratio; with 12,000.00 of fixed costs you break even at 12,000 ÷ 20 = 600 units. Use the contribution margin calculator for the break-even point and margin of safety.
How to raise gross margin
Raise prices where customers accept it, cut discounting, negotiate supplier and freight costs, and steer sales towards products with higher margins. A one-point gain in gross margin on 50,000 of revenue adds 500 of gross profit with no extra sales. To price a single item for a target margin, use the margin calculator.
Frequently asked questions
How do you calculate gross profit?
Subtract the cost of goods sold from revenue. A business with 50,000 of sales and 30,000 of cost of goods sold has a gross profit of 20,000. Operating expenses such as rent, salaries and marketing come out later, below the gross profit line.
How do you calculate gross margin?
Divide gross profit by revenue and multiply by 100. A gross profit of 20,000 on revenue of 50,000 is a 40% gross margin: each unit of currency in sales leaves 0.40 to pay operating costs and profit.
What is included in the cost of goods sold?
The direct cost of what you sold: purchase price or materials, direct labour, freight in and production overheads. IAS 2 sets the rules for inventory under IFRS. Selling, marketing and general admin costs are operating expenses, not COGS.
What is the difference between gross profit and net profit?
Gross profit is revenue minus the cost of goods sold. Net profit goes further and subtracts operating expenses, interest and tax. A business can have a healthy gross profit and still make a net loss if overheads are too high.
Is gross margin the same as markup?
No. Gross margin divides gross profit by revenue; markup divides it by the cost of goods sold. A 40% gross margin is a 66.67% markup on cost, as the calculator shows side by side.
What is a good gross profit margin?
It depends on the industry. Software and many services run gross margins of 60–80%, while retail, wholesale and restaurants often work with 20–40%. Compare your margin with your own sector and with your own past years.
Related tools: margin calculator, markup calculator, profit margin calculator (US). More on sales and running a sales team on the SalesBond blog and the home page.
Official sources
- IFRS Foundation: IAS 1 Presentation of Financial Statements — gross profit as revenue less cost of sales.
- IFRS Foundation: IAS 2 Inventories — costs of purchase and conversion in the cost of goods sold.
- NYU Stern (Damodaran): margins by sector — gross margins by industry.
Updated on Nov 5, 2026. This calculator is for information only and is not tax, legal or payroll advice. Results come from the formulas above; your accountant decides what goes into the cost of goods sold for your books and tax return.
