Gross Profit Calculator

1. Choose a calculation mode. The default mode takes revenue and COGS and outputs gross profit, gross margin, and markup. Use "Find COGS from Margin" if you know what margin you need to hit and want to see the maximum you can spend on goods. Use "Find Price from Markup" to calculate a selling price when you know your cost and desired markup percentage.
2. Enter Revenue. This is total sales for the period before any deductions. For a single product, it is price times units sold. For a business, use net revenue after returns and discounts.
3. Enter COGS (Cost of Goods Sold). COGS includes only the direct costs of producing what you sell: raw materials, manufacturing labor, and direct overhead. It does not include operating expenses like salaries for sales staff, rent, or marketing. That distinction is important for accurate margin analysis.
4. Read both margin and markup. Margin and markup are different. A 40% gross margin is not the same as a 40% markup. Confusing them is one of the most common pricing errors in small business.

Gross profit is the simplest measure of business profitability after accounting for the direct costs of producing goods or services. It tells you how much money is left over to cover operating expenses and generate net income.

Gross Profit       = Revenue - COGS

Gross Margin (%)   = (Gross Profit / Revenue) × 100

Markup (%)         = (Gross Profit / COGS) × 100

Reverse: Find COGS from margin:
  COGS = Revenue × (1 - Margin%)

Reverse: Find Revenue from markup:
  Revenue = COGS × (1 + Markup%)

• Revenue is total sales income before any cost deductions
• COGS includes direct materials, direct labor, and manufacturing overhead
• Gross Margin is expressed as a percentage of revenue (a revenue-based ratio)
• Markup is expressed as a percentage of cost (a cost-based ratio)

Worked example: A furniture maker sells a table for $1,200. Wood, hardware, and direct labor cost $720.

Gross Profit = $1,200 - $720 = $480
Gross Margin = ($480 / $1,200) × 100 = 40%
Markup       = ($480 / $720) × 100 = 66.7%

A 40% gross margin and a 66.7% markup represent the same profit dollars from the same transaction, just expressed relative to different bases. When a retailer says "we mark up goods 50%", that translates to a gross margin of 33.3%, not 50%.

Industry benchmarks: Grocery retail runs 25% to 30% gross margins. Software averages 70% to 80%. Restaurants typically land at 60% to 65% on food costs alone. Manufacturing ranges from 20% to 50% depending on the sector. Comparing your margin against industry peers is more useful than a universal target.