Gross margin calculator ESTIMATE

Turn revenue and cost of goods sold into gross profit and a margin percentage.

Important: Educational estimates only. Not tax, legal, or accounting advice. AI Accounting Desk is not a CPA firm and does not provide professional services. Verify figures with a licensed professional and official IRS sources (irs.gov) before making decisions.

Inputs

Sales for the period, before operating expenses
Direct cost of what you sold. Use the COGS calculator if you need to build that number.

Result ESTIMATE

Gross margin
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Gross profit—

What gross margin measures

Gross profit is revenue minus cost of goods sold. Gross margin is that profit divided by revenue. A shop with $1,000 of sales and $400 of cost of goods sold has $600 of gross profit and a 60% gross margin. Operating costs such as rent, software, and the owner’s pay are not in this figure. Those show up later, on the way to net profit. See how to read a profit and loss statement.

Gross profit = Revenue − COGS
Gross margin = Gross profit ÷ Revenue

When the percentage lies

Margin is undefined when revenue is zero, and it goes negative when cost of goods sold is higher than sales. A product business and a service business should not share one “good” margin. A consultant may have little COGS and a high gross margin, then spend most of it on labor that is classified as an operating expense. A retailer may live on a much thinner gross margin and make it up on volume. Compare the percentage with your own history, not with a stranger’s industry slogan.

Margin is not markup

Markup divides profit by cost. Margin divides profit by price. The same $100 cost and $150 price is a 50% markup and a 33.33% margin. Mixing the two is how a price list quietly misses its target. The markup vs margin calculator converts either direction.

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