Gross Margin Calculator
Example: Revenue (sales): 100000 $ · Cost of goods sold (COGS): 60000 $
| Gross profit | $40,000 |
| Gross margin | 40.00% |
| Equivalent markup | 66.67% |
Worked example
On $100,000 of revenue with $60,000 of cost of goods sold, gross profit is $40,000. Dividing $40,000 by the $100,000 of revenue gives a 40% gross margin. The same $40,000 over the $60,000 cost is a 66.7% markup. Margin and markup describe the same profit against different bases, which is why the two numbers differ.
Frequently asked questions
What is cost of goods sold?
COGS is the direct cost of producing what you sold: materials, direct labor, and manufacturing or purchase costs. It excludes overhead like rent, marketing, and administrative salaries, which fall below the gross-profit line.
What is a good gross margin?
It varies widely by industry. Software can exceed 80%, retail often sits around 25 to 50%, and grocery runs much thinner. Compare yours to peers in your sector rather than to an absolute benchmark.
How is gross margin different from net margin?
Gross margin subtracts only the direct cost of goods; net margin subtracts everything, including overhead, marketing, interest, and taxes. Gross margin measures the health of your product; net margin measures the health of the whole business.
Why track gross margin over time?
A falling gross margin is an early warning that input costs are rising or your prices are slipping. Catching that trend early lets you raise prices or renegotiate costs before it erodes profit.