Gross Profit Margin Calculator for Margin, Markup and Price
How to Calculate Margin, Markup and Price with the Gross Profit Margin Calculator
Calculate gross profit, margin percentage, markup, selling price, or product cost. Compare margin vs markup and price products with confidence.
Formula
Gross margin = (revenue - COGS) / revenue x 100
How to use the result
Use gross profit dollars to cover operating costs; do not confuse margin with markup on cost.
COGS should include direct product or service delivery costs for the same period as revenue. Inputs and calculations stay in this browser.
Calculate your product's gross profit margin instantly. Enter your cost and desired markup to determine the optimal selling price, profit amount, and margin percentage.
Calculate Your Margin
Profit Margin Calculator Results
Your Sale Price
$0.00
Your Profit
$0.00
Gross Margin
Enter values0.00%
What is Gross Profit Margin?
The Gross Profit Margin represents the difference between your product's selling price and its COGS (Cost of Goods Sold). COGS encompasses all expenses directly tied to producing or acquiring a product, including raw materials and direct labor costs. It excludes marketing, administrative, and other operating expenses.
Understanding your gross margin is essential for pricing strategy, as it reveals how much money remains from each sale to cover other business expenses and generate net profit.
How to Calculate Gross Profit Margin
Identify Your COGS
Determine your cost of goods sold. Example: $10 per unit.
Find Your Revenue
Determine your selling price. Example: $25 per unit.
Calculate Gross Profit
Subtract COGS from revenue: $25 - $10 = $15 profit.
Divide by Revenue
Calculate the ratio: $15 ÷ $25 = 0.6
Convert to Percentage
Multiply by 100: 0.6 × 100 = 60% gross margin.
Gross Profit Margin Formula
Gross Margin = (Revenue - Costs) ÷ Revenue × 100
Margins are always expressed as percentages. You can simplify the formula to:
Simplified margin formula:
Gross Margin = Profit ÷ Revenue × 100
Gross profit in dollars:
Gross Profit = Revenue - Costs
Find selling price from margin:
Revenue = (Profit × 100) ÷ Margin
Find maximum cost:
Costs = Revenue - (Margin × Revenue ÷ 100)
Markup vs. Margin: Understanding the Difference
It's crucial to distinguish between markup and margin—they're related but measure different things. Markup calculates profit as a percentage of your costs (COGS), while margin expresses profit as a percentage of your selling price (revenue).
Markup
Based on your cost (what you paid)
Markup = (Profit ÷ Cost) × 100
Example: $15 profit on $10 cost = 150% markup
Margin
Based on selling price (what customer pays)
Margin = (Profit ÷ Revenue) × 100
Example: $15 profit on $25 revenue = 60% margin
How to Calculate Specific Profit Margins
How to Calculate a 20% Margin
- 1Convert 20% to decimal form: 0.2
- 2Subtract from 1: 1 - 0.2 = 0.8
- 3Divide your COGS by 0.8
- 4Result is your selling price for 20% margin
Example: $10 COGS ÷ 0.8 = $12.50 selling price
How to Calculate a 30% Margin
- 1Convert 30% to decimal form: 0.3
- 2Subtract from 1: 1 - 0.3 = 0.7
- 3Divide your COGS by 0.7
- 4Result is your selling price for 30% margin
Example: $10 COGS ÷ 0.7 = $14.29 selling price
Frequently Asked Questions
Are profits and margins the same thing?
No, they measure different things. Profit is the absolute monetary value ($) you earn from each sale (profit = revenue - costs). Margin expresses that profit as a ratio of your revenue (margin = profit ÷ revenue). That's why margins are always shown as percentages, while profits are shown as dollar amounts.
What's a healthy gross profit margin?
This varies by industry. Retail typically sees 25-50%, while software companies can achieve 70-90%. Generally, higher margins give you more flexibility to cover operating expenses and generate net profit.
How does gross margin differ from net margin?
Gross margin only considers the cost of goods sold, while net margin accounts for all expenses including marketing, salaries, rent, and taxes. Net margin gives a complete picture of profitability.