Gross Profit Margin Calculator Formula

Understand the math behind the gross profit margin calculator. Each variable explained with a worked example.

Use the Gross Profit Margin Calculator

Formulas Used

Gross Profit

gross_profit = revenue - cogs

Gross Profit Margin

gross_margin = revenue > 0 ? ((revenue - cogs) / revenue) * 100 : 0

COGS as % of Revenue

cogs_pct = revenue > 0 ? (cogs / revenue) * 100 : 0

Variables

VariableDescriptionDefault
revenueRevenue(USD)800000
cogsCost of Goods Sold (COGS)(USD)320000

How It Works

How to Calculate Gross Profit Margin

Formula

Gross Profit = Revenue - COGS Gross Profit Margin = (Gross Profit / Revenue) x 100

Gross profit margin strips away only the direct costs of production, leaving a clear picture of how efficiently you convert raw materials and labor into sellable products. It is the first profitability checkpoint: if gross margin is weak, no amount of overhead control will produce healthy net profits.

Worked Example

A company has $800,000 in revenue and $320,000 in cost of goods sold.

revenue = 800000cogs = 320000
  1. 01Gross Profit = $800,000 - $320,000 = $480,000
  2. 02Gross Profit Margin = ($480,000 / $800,000) x 100 = 60%
  3. 03COGS as % of Revenue = ($320,000 / $800,000) x 100 = 40%

Ready to run the numbers?

Open Gross Profit Margin Calculator