# Gross Margin Calculator

Calculate gross margin, gross profit, and markup percentage from revenue and COGS. Free gross margin calculator for businesses.

## What this calculates

Calculate your gross margin, gross profit, and markup percentage instantly. Enter your revenue and cost of goods sold to understand your profitability at the product level and compare to industry benchmarks.

## Inputs

- **Revenue (Sales)** ($) — min 0 — Total revenue or sales amount.
- **Cost of Goods Sold (COGS)** ($) — min 0 — Direct costs to produce or acquire the goods sold.

## Outputs

- **Gross Profit** — formatted as currency — Revenue minus cost of goods sold.
- **Gross Margin** — formatted as percentage — Gross profit as a percentage of revenue.
- **Markup Percentage** — formatted as percentage — Gross profit as a percentage of COGS.

## Details

Gross margin is one of the most important profitability metrics for any business. It measures the percentage of revenue that remains after subtracting the direct costs of producing or acquiring the goods sold (COGS). The formula is: Gross Margin = (Revenue - COGS) / Revenue x 100.

Gross margin differs from markup, though both measure profitability. Gross margin expresses profit as a percentage of the selling price, while markup expresses profit as a percentage of the cost. For example, if you buy a product for $60 and sell it for $100, your gross margin is 40% ($40/$100) but your markup is 66.7% ($40/$60). Both numbers describe the same profit -- they just use different bases.

Industry benchmarks vary significantly. Software companies often have gross margins of 70-90%, retail typically ranges from 25-50%, and manufacturing from 25-35%. Comparing your gross margin to industry averages helps identify pricing issues or cost inefficiencies. A declining gross margin over time may signal rising costs, increased competition, or the need to adjust pricing strategy.

## Frequently Asked Questions

**Q: What is the difference between gross margin and net margin?**

A: Gross margin only subtracts direct production costs (COGS) from revenue, while net margin subtracts all expenses including operating costs, interest, and taxes. Gross margin measures production efficiency, while net margin measures overall profitability. A company can have a healthy gross margin but low net margin if operating expenses are high.

**Q: What is the difference between margin and markup?**

A: Margin is profit as a percentage of the selling price (revenue), while markup is profit as a percentage of the cost (COGS). A 50% markup does not equal 50% margin. If you buy for $100 and mark up 50%, you sell for $150, but your margin is only 33.3% ($50/$150). To convert: Margin = Markup / (1 + Markup), and Markup = Margin / (1 - Margin).

**Q: What is included in cost of goods sold (COGS)?**

A: COGS includes all direct costs to produce or acquire products: raw materials, direct labor, manufacturing overhead, freight, and packaging. It does not include indirect costs like marketing, rent, administrative salaries, or research and development. For a retailer, COGS is the wholesale purchase price. For manufacturers, it includes materials, factory labor, and production overhead.

**Q: What is a good gross margin?**

A: Good gross margins vary by industry. Software and SaaS companies: 70-90%. Professional services: 50-75%. Retail: 25-50%. Manufacturing: 25-35%. Restaurants: 60-70% on food. The key is comparing to your specific industry and tracking trends over time. A consistently declining gross margin is a warning sign regardless of industry.

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Source: https://vastcalc.com/calculators/finance/gross-margin
Category: Finance
Last updated: 2026-04-21