What is gross profit?

Gross profit is revenue minus the cost of goods sold (COGS). COGS covers only the direct costs of producing or purchasing the goods or services you sold — raw materials, direct labour, manufacturing overheads, freight-in, and import duties. It does NOT include operating expenses such as rent, salaries for non-production staff, marketing, or depreciation of non-production assets.

What is the gross profit formula?

Gross Profit = Revenue minus COGS. Gross Profit Margin % = (Gross Profit divided by Revenue) multiplied by 100. So if revenue is 500,000 and COGS is 320,000, gross profit is 180,000 and the gross margin is (180,000 / 500,000) * 100 = 36%.

What is a good gross margin?

It depends heavily on the industry. Software-as-a-service (SaaS) businesses often achieve 70-85% gross margins because their marginal cost of serving an extra customer is near zero. Retail and e-commerce typically land between 25-50%. Manufacturing runs 20-40%. Grocery and food delivery can be as low as 10-25%. Compare your margin to your direct competitors and track the trend over time rather than targeting a universal benchmark.

What is the difference between gross margin and net margin?

Gross margin measures profitability BEFORE operating expenses (rent, salaries, R&D, marketing, depreciation). Net margin is the bottom line after ALL costs including operating expenses, interest, and tax. A business can have a healthy 60% gross margin and still lose money at the net level if its operating costs are very high. This calculator focuses on gross margin — subtract operating expenses from gross profit to reach EBIT (operating profit), then subtract interest and tax to reach net profit.

Why is the blended margin not a simple average of the row margins?

Because each period or product line may have a different revenue size. A simple average would treat a 100,000 revenue quarter identically to a 1,000,000 revenue quarter, distorting the overall picture. The blended (or weighted) margin divides TOTAL gross profit by TOTAL revenue, so larger periods automatically carry more weight. This is the standard method used in financial statements and investor presentations.

What costs should I include in COGS?

Include only the costs that vary directly with production or delivery of the product. For a manufacturer, that is raw materials, direct labour (assembly-line workers, not management), and manufacturing overheads (factory rent, machine depreciation). For a retailer, it is the wholesale purchase price plus freight-in. For a SaaS company, it is hosting, payment processing fees, and customer-facing support. Exclude sales and marketing, administrative salaries, R&D, and corporate office costs — those go below the gross profit line as operating expenses.

Gross Profit Calculator

Gross profit is the first and most important line on an income statement because it tells you whether your core business — making or buying and then selling a product or service — is fundamentally profitable. Strip away rent, salaries, marketing, and every other overhead, and the question becomes simple: does the price you charge cover the direct cost of what you sold? If not, no amount of cost-cutting elsewhere can save you. This calculator answers that question instantly for one period or many, showing the gross profit in money terms, the gross margin as a percentage of revenue, and the COGS ratio (what fraction of every revenue pound goes straight back to direct costs).

How it works

The formula is deliberately straightforward:

Gross Profit = Revenue minus COGS

Gross Margin % = (Gross Profit / Revenue) multiplied by 100

COGS (Cost of Goods Sold) covers only the direct, variable costs of production or purchase: raw materials, direct labour, manufacturing overheads (factory rent, machine depreciation), inbound freight, and import duties. It excludes all operating expenses — head-office salaries, marketing, R&D, sales teams, and administrative rent. Those come below the gross profit line on the income statement.

When you enter multiple rows — quarters, product lines, or customer segments — the calculator builds the blended gross margin by dividing total gross profit by total revenue. This is a revenue-weighted average, not a simple mean: a quarter with 1,000,000 in revenue contributes ten times as much to the blended figure as a quarter with 100,000. That weighting is what every bank analyst, investor, and CFO expects to see, and it is what this tool computes.

The stacked bar chart shows COGS (grey) and gross profit (green) side by side for each period, making revenue mix and margin trends immediately visible.

Worked example

Imagine a small manufacturer with four quarters of trading:

Period	Revenue	COGS	Gross Profit	Margin
Q1	500,000	320,000	180,000	36.0%
Q2	620,000	385,000	235,000	37.9%
Q3	710,000	430,000	280,000	39.4%
Q4	850,000	510,000	340,000	40.0%
Total	2,680,000	1,645,000	1,035,000	38.6%

The blended gross margin is 1,035,000 / 2,680,000 = 38.6%. Notice this is not the simple average of the four row margins (36.0 + 37.9 + 39.4 + 40.0) / 4 = 38.3% — the revenue-weighted figure is slightly higher because Q4, the highest-margin quarter, also has the largest revenue, so it pulls the blended rate up.

The trend from 36% to 40% over the year tells a positive story: unit economics are improving as the business scales, likely because fixed production overheads are being spread over a larger output. An analyst would expect this company to sustain or widen its gross margin as revenue continues to grow.

Every calculation runs entirely in your browser — no figures are sent to any server.