How to Calculate Gross Profit Margin

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Gross Profit Margin Calculator

Quickly determine your business profitability and markup percentage.

Revenue (Sales)

Cost of Goods Sold (COGS)

Gross Profit:

Gross Profit Margin:

Markup:

Understanding your gross profit margin is essential for any business owner, freelancer, or financial analyst. It represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods sold or services provided.

Gross Margin (%) = [(Revenue – COGS) / Revenue] * 100

Step-by-Step Calculation Guide

Follow these steps to manually calculate your margin:

Identify Revenue: This is the total amount of money generated from sales before any expenses are deducted.
Calculate COGS: Cost of Goods Sold includes direct labor, materials, and manufacturing overhead. It does not include indirect costs like marketing or rent.
Subtract COGS from Revenue: This gives you your "Gross Profit" in currency units.
Divide and Multiply: Divide the Gross Profit by the Revenue and multiply by 100 to get the percentage.

Example Calculation

If a retail store sells a jacket for $200 (Revenue) and the store bought that jacket from a wholesaler for $120 (COGS):

Gross Profit = $200 – $120 = $80
Gross Margin = ($80 / $200) * 100 = 40%

Margin vs. Markup

While often used interchangeably, margin and markup are different perspectives on the same transaction. Margin is the relationship between gross profit and sales price, while Markup is the relationship between gross profit and the cost price. Understanding this distinction is vital for pricing products correctly to ensure target profitability.

Gross Profit Margin Calculator