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Gross margin calculator

Enter revenue and the cost of goods sold for a period to see the gross profit and the gross margin, plus the cost ratio and the markup on cost.

Net sales for the period, before tax.

Direct costs of what you sold: materials, direct labour, freight in.

Gross margin36%$180,000.00 gross profit on $500,000.00 revenue
Revenue$500,000.00
Cost of goods sold−$320,000.00
Gross profit$180,000.00
Gross marginGross profit ÷ revenue36%
Cost of goods sold ratioCOGS ÷ revenue64%
Markup on costGross profit ÷ COGS56.25%

Gross margin = (revenue − cost of goods sold) ÷ revenue × 100

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How to use the gross margin calculator

  1. Pick the currency.
  2. Enter revenue for the period.
  3. Enter the cost of goods sold for the same period.
  4. Read the gross profit and gross margin.

Gross margin, worked through

A shop sells $500,000 of stock in a year. Opening stock was $60,000, it bought $330,000 and closing stock is $70,000, so COGS = $60,000 + $330,000 − $70,000 = $320,000. Gross profit is $180,000 and gross margin is 36%.

RevenueCOGSGross profitGross margin
$100,000$70,000$30,00030%
$500,000$320,000$180,00036%
$1,200,000$300,000$900,00075%

Using gross margin

Gross margin tells you how much of each sale is left to pay for overheads and profit. Track it month by month: a falling gross margin usually means rising supplier prices, more discounting, or a shift towards lower-margin products. Compare it with businesses in the same trade, since normal margins vary widely between retail, manufacturing and services.

Questions

What is the gross margin formula?

Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. Revenue of $500,000 with COGS of $320,000 gives $180,000 gross profit and a 36% gross margin.

What goes into cost of goods sold?

The direct costs of what you sold: materials or stock purchased, direct labour, freight in and production overheads. Selling, marketing and office costs are operating expenses, not COGS.

What is the difference between gross margin and net margin?

Gross margin only subtracts the direct cost of sales. Net margin subtracts everything: operating costs, interest and tax. A business can have a healthy gross margin and still lose money.

Is gross margin the same as gross profit?

Gross profit is an amount (revenue − COGS). Gross margin is that amount as a percentage of revenue.

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