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Gross Profit Calculator
Gross profit calculator. Enter revenue and cost of goods sold (COGS) to calculate gross profit and gross margin percentage. Includes the formula and examples.
Gross profit results
Gross profit
Revenue − COGS
Gross margin
(Profit ÷ revenue) × 100
Gross markup
(Profit ÷ COGS) × 100
How to Calculate Gross Profit
If you’re searching for “how to calculate gross profit”, the formula is simply revenue minus cost of goods sold (COGS).
Gross Profit Formula
Gross profit = Revenue − COGS
Gross Margin Formula
Gross margin % = (Gross profit ÷ Revenue) × 100
Example
If revenue is $10,000 and COGS is $6,500: gross profit = $10,000 − $6,500 = $3,500. Gross margin = $3,500 ÷ $10,000 = 35%.
Frequently Asked Questions
What is gross profit?
Gross profit is the revenue remaining after subtracting the direct costs of producing goods or services (COGS). Formula: Gross Profit = Revenue − COGS. It measures how efficiently a company produces its products before operating expenses are considered.
What is gross margin?
Gross margin (gross profit margin) is gross profit expressed as a percentage of revenue. Formula: Gross Margin = (Gross Profit ÷ Revenue) × 100. A 40% gross margin means $0.40 of every $1 in revenue remains after covering direct production costs.
What is the difference between gross profit and net profit?
Gross profit deducts only the cost of goods sold from revenue. Net profit (net income) deducts all expenses — including operating costs, interest, taxes, and depreciation. Gross profit is always higher than net profit for a profitable business.
What counts as cost of goods sold (COGS)?
COGS includes direct costs tied to producing the goods sold: raw materials, direct labour, manufacturing overhead, and shipping to customers. It does not include indirect costs like marketing, rent, or administrative salaries — those are operating expenses.
What is a good gross margin?
It varies significantly by industry. Software companies often have 70–90% gross margins. Retail is typically 20–50%. Manufacturing is often 25–40%. Grocery is notoriously low at 15–30%. Always compare gross margin to industry benchmarks rather than a universal standard.
How can I improve gross profit margin?
The two main levers are increasing revenue (raising prices or selling more) and reducing COGS (negotiating better supplier terms, improving production efficiency, or reducing material waste). Cutting overhead costs does not affect gross margin — those savings show up in operating profit.