Method
How to calculate gross margin
Gross profit is revenue less direct cost. Dividing that profit by revenue makes businesses of different sizes easier to compare.
FORMULAGross margin = (revenue − cost of goods sold) ÷ revenue × 100
Worked example
Gross margin calculator example
Revenue of $120,000 and direct cost of $72,000 produce $48,000 in gross profit.
Change one assumption at a time to see what drives the result. The output is an estimate, not a quote, forecast or recommendation.
FAQ
Gross margin calculator FAQ
Is gross margin the same as markup?
No. Margin divides profit by selling price or revenue; markup divides profit by cost.
Does gross margin include overhead?
Usually not. Rent, administration and other operating costs sit below gross profit unless they are classified as direct costs.
Can gross margin exceed 100%?
Not under ordinary positive revenue and cost inputs. Negative costs or accounting adjustments require a fuller model.