Gross margin calculator ESTIMATE
Turn revenue and cost of goods sold into gross profit and a margin percentage.
Result ESTIMATE
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.