How this calculator works
Gross profit subtracts the cost of goods sold from the matching sales revenue. Margin divides that profit by revenue, showing the share left before overhead, interest and income taxes. Use amounts before sales tax. A cost above revenue produces a negative margin; zero revenue cannot define the ratio.
Formula
Gross profit = R - C; gross profit margin = (R-C)/R, displayed as a percentage. R is positive sales revenue and C is the matching goods cost. The denominator is revenue.
Worked example
Selling goods for $150 that cost $100 gives $50 gross profit and a 33.333333% margin. If revenue is $100 and cost is $125, gross profit is -$25 and margin is -25%.
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Frequently asked questions
How is margin different from markup?
Margin divides profit by revenue. Markup measures the added amount against cost. A $100 cost and $150 selling price give 50% markup but about 33.33% margin.
Does this show after-tax profit?
No. Gross profit excludes overhead, financing costs and income tax. The profit calculator can also subtract operating expenses.
What happens if cost equals revenue?
Gross profit is zero and the margin is 0%. Revenue must be positive, so the ratio is defined.