Gross Margin Calculator

A Gross Margin Calculator helps businesses quickly determine how much profit they are making from their sales after accounting for the Cost of Goods Sold (COGS). It is one of the most important profitability metrics that shows the efficiency of a company’s core operations.

Gross margin is usually expressed as a percentage and tells you how much of every dollar earned is kept as profit before deducting operating expenses, taxes, and interest.

Formula 1: Gross Profit

$\text{Gross Profit}=\text{Revenue}-\text{COGS}$

Formula 2: Gross Margin (%)

$\text{Gross Margin (\%)}=\left(\frac{\text{Gross Profit}}{\text{Revenue}}\right)\times 100$

Example Calculation

Let’s say:

• Revenue (Sales) = $50,000
• Cost of Goods Sold (COGS) = $30,000

Step 1: Calculate Gross Profit

$\text{Gross Profit}=50,000-30,000=20,000$

Step 2: Calculate Gross Margin (%)

$\text{Gross Margin (\%)}=\left(\frac{20,000}{50,000}\right)\times 100=40\%$

Final Results:

• Gross Profit = $20,000
• Gross Margin = 40%

Why is Gross Margin Important?

• Helps measure profitability of core business operations.
• Shows efficiency in managing production costs.
• Useful for comparing performance across industries.
• Guides pricing, cost control, and financial planning decisions.