How to Use the Gross Profit Margin Calculator
Gross profit margin shows what share of revenue is left after the direct cost of what you sold. Because it sits above operating expenses, it answers the first question on any income statement: does the product itself make money?
COGS covers only costs tied directly to the goods sold โ purchase cost for a reseller, or materials, direct labor, and factory overhead for a manufacturer. Rent, advertising, and office salaries belong in SG&A, not in COGS.
Margin and markup are not the same number. Margin divides gross profit by revenue; markup divides the same gross profit by cost. A 50% markup on cost works out to roughly a 33.3% gross margin, which is why quoting the two interchangeably leads to underpricing.
Healthy ranges differ sharply by industry, so compare against peers and your own history rather than an absolute target. These figures are calculated only from what you enter, and inventory valuation choices can shift COGS โ check the numbers against your books.
Frequently Asked Questions
No. Sales tax is collected on behalf of the state and remitted, so it is not your revenue. Enter net revenue excluding sales tax, and keep COGS on the same basis so both numbers line up.
Gross margin is measured before operating expenses. Heavy rent, payroll, or ad spend can still push operating income negative. Look at the SG&A ratio and operating margin alongside it to see where the money is going.