Gross Profit Calculator
Calculate gross profit and gross margin percentage from revenue and cost of goods sold (COGS).
$
$
Gross Profit
$20,000
Gross Margin
40.0%
How Gross Profit Is Calculated
Gross profit is the money left over after subtracting the direct cost of producing goods or services (cost of goods sold, or COGS) from revenue. It shows how efficiently a business turns sales into profit before accounting for overhead, marketing, and other operating expenses.
Gross Margin (%) = (Gross Profit ÷ Revenue) × 100
Example
A business with $50,000 in revenue and $30,000 in cost of goods sold has a gross profit of $20,000, which is a gross margin of 40% — meaning 40 cents of every sales dollar remains after covering direct production costs.
Common Use Cases
- Pricing products or services to hit a target margin.
- Comparing profitability across product lines or business units.
- Benchmarking margins against industry competitors.
- Tracking whether rising costs are eroding profitability over time.
FAQs
What counts as cost of goods sold?
COGS includes direct costs tied to producing what's sold — raw materials, direct labor, and manufacturing overhead. It excludes indirect costs like marketing, rent, and administrative salaries.
What's the difference between gross profit and net profit?
Gross profit only subtracts COGS from revenue. Net profit goes further, deducting operating expenses, interest, and taxes to arrive at the actual bottom-line earnings.
What is a good gross margin?
It varies widely by industry — software companies often see 70-90% margins, while retailers and grocers may run 20-30%. Compare your margin against businesses in the same sector.