Gross Margin Calculator
Find gross margin and gross profit.
Results update as you type.
How it works
Gross margin measures how much of your revenue is left after the direct costs of what you sell, and this calculator computes it. You enter revenue and cost of goods sold (COGS), and it returns the gross margin percentage and gross profit in dollars. Gross profit is revenue minus COGS, and gross margin expresses that as a percentage of revenue, showing how many cents of each sales dollar remain to cover operating expenses and profit. COGS includes the direct costs of producing goods or delivering services — materials, direct labor, and manufacturing — but not overhead like rent, marketing, or administration, which are subtracted later to reach operating and net margins. Gross margin is a key indicator of a product's or business's fundamental profitability and pricing power: a higher gross margin means more room to cover expenses and generate profit. Margins vary enormously by industry — software and services often have very high gross margins (70 percent or more) because their direct costs are low, while retail and manufacturing typically run much lower. Tracking gross margin over time reveals whether rising costs or discounting are eroding profitability, and comparing it to competitors shows relative efficiency. Don't confuse margin with markup: markup is profit as a percentage of cost, while margin is profit as a percentage of revenue. Enter revenue and COGS to find your gross margin.
Gross margin = (revenue − COGS) ÷ revenue × 100
Gross margin is gross profit — revenue minus the cost of goods sold — divided by revenue, expressed as a percentage. It shows what portion of each sales dollar remains after covering the direct costs of producing the goods or services sold.
Source:Financial accounting
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter revenue and cost of goods sold (cogs).
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Gross margin updates instantly as you type — no button to press.
Frequently asked questions
How do you calculate gross margin?
Subtract the cost of goods sold from revenue to get gross profit, divide by revenue, and multiply by 100. With $100,000 revenue and $60,000 COGS, gross profit is $40,000 and gross margin is 40 percent. It shows what share of each sales dollar remains after the direct costs of producing what you sold.
What is included in COGS?
Cost of goods sold includes the direct costs of producing goods or delivering services — raw materials, direct labor, and manufacturing costs. It excludes indirect costs like rent, marketing, administration, and other overhead, which are subtracted later to calculate operating and net profit. Getting COGS right is essential for an accurate gross margin.
What is the difference between gross margin and net margin?
Gross margin subtracts only the direct cost of goods sold, showing profitability before overhead. Net margin subtracts all expenses — COGS plus operating costs, interest, and taxes — showing the final bottom-line profit as a percentage of revenue. Gross margin is always higher than net margin; the gap reflects the business's overhead and other costs.
What is a good gross margin?
It varies enormously by industry. Software and digital services often exceed 70 or 80 percent because direct costs are minimal, while grocery and retail may run 20 to 40 percent, and some manufacturing lower. Rather than a universal target, compare your gross margin to industry benchmarks and your own trend over time to judge whether it is healthy.
What is the difference between margin and markup?
Margin expresses profit as a percentage of the selling price (revenue), while markup expresses it as a percentage of the cost. A product costing $60 sold for $100 has a 40 percent margin but a 67 percent markup. They describe the same profit differently, so confusing them leads to pricing errors — always be clear which one you mean.