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Reviewed by: Jane M. Patterson, CPA
Financial Analyst & Certified Public Accountant

Enter your Total Revenue and Cost of Goods Sold (COGS) to find your Gross Profit and Gross Profit Margin. You can also fill any two fields to solve for the third.

Gross Profit Margin Calculator

Enter any 2 values to calculate the others.

Gross Profit Margin Formula

To calculate the gross profit margin, you first need to find the gross profit. The formulas are as follows:

Gross Profit = Total Revenue – Cost of Goods Sold (COGS)

Gross Profit Margin = (Gross Profit / Total Revenue) * 100

Formula Source:  Investopedia – Gross Profit Margin Definition (2025)

• Total Revenue: The total amount of income generated from sales.
• COGS: The direct costs of producing the goods sold by a company.
• Gross Profit: The profit a company makes after deducting the costs associated with making its products.

What is Gross Profit Margin?

Gross Profit Margin is a key profitability metric that measures what percentage of revenue is left over after accounting for the Cost of Goods Sold (COGS). It is expressed as a percentage and represents the proportion of each dollar of revenue that the company retains as gross profit.

A high gross profit margin indicates that a company is efficiently managing its direct production costs. It shows how much surplus the company generates from its sales, which can then be used to cover other operating expenses, debt, and result in net profit.

How to Calculate Gross Profit Margin (Example)

Example Calculation:

1. 1. Find Total Revenue.

   Let’s say a company has a total revenue of $800,000 for the year.

2. 2. Find Cost of Goods Sold (COGS).

   The direct costs (materials, labor) to produce those goods were $500,000.

3. 3. Calculate Gross Profit.

   Gross Profit = $800,000 (Revenue) – $500,000 (COGS) = $300,000

4. 4. Calculate Gross Profit Margin.

   Gross Profit Margin = ($300,000 / $800,000) * 100 = 37.5%

Frequently Asked Questions (FAQ)

What is a “good” Gross Profit Margin?

A “good” margin varies significantly by industry. Software and tech companies might have margins over 80%, while retail or construction might have margins between 20-40%. It’s best to compare a company’s margin to its industry average.

What’s the difference between Gross Profit and Net Profit?

Gross Profit only subtracts the direct costs of production (COGS) from revenue. Net Profit (or Net Income) subtracts *all* expenses, including operating expenses (like marketing, salaries, rent), interest, and taxes.

How can a company improve its Gross Profit Margin?

A company can improve its margin by either increasing its prices (raising revenue) or decreasing its direct production costs (lowering COGS), for example, by finding cheaper suppliers or improving manufacturing efficiency.