Gross Margin Calculator

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Reviewed by: David Chen, CFA
David is a Chartered Financial Analyst with 15 years of experience in corporate finance, specializing in profitability analysis and business valuation.

This 4-in-1 Gross Margin calculator helps you find the missing piece of your company’s profitability. Enter any three variables—Total Revenue, COGS, Gross Profit, or Gross Margin—to solve for the fourth.

Total Revenue ($) (R)

Cost of Goods Sold (COGS) ($) (C)

Gross Profit ($) (G)

Gross Margin (%) (M)

Gross Margin Formulas

Solve for Gross Profit (G):
G = R – C

Solve for Gross Margin (M):
M = (G / R) * 100

Solve for Revenue (R):
R = G / (M / 100) OR R = C + G

Solve for COGS (C):
C = R – G OR C = R * (1 – M/100)

Formula Source: Investopedia

Formula Variables

(R) Total Revenue: The total amount of money generated from sales.
(C) Cost of Goods Sold (COGS): The direct costs of producing your products (e.g., raw materials, direct labor).
(G) Gross Profit: The profit remaining after subtracting COGS from Revenue. (Revenue – COGS).
(M) Gross Margin (%): The percentage of revenue that remains as gross profit. (Gross Profit / Revenue).

Related Calculators

What is Gross Margin?

Gross Margin is a vital profitability ratio that measures how much money a company keeps from its total revenue after accounting for the direct costs associated with producing its goods or services (known as the Cost of Goods Sold, or COGS).

It is expressed as a percentage and is one of the first indicators of a company’s financial health and efficiency. A high gross margin means the company is very efficient at converting revenue into actual profit. A low gross margin suggests it is spending too much on direct materials and labor relative to its sales price.

Gross Margin is different from Net Profit Margin. Gross margin only subtracts *direct* costs (COGS), while net profit margin subtracts *all* business expenses, including operating costs (like rent, salaries, marketing) as well as interest and taxes. A business can have a high gross margin but a low net margin if its overhead costs are too high.

How to Calculate Gross Margin (Example)

Find Total Revenue and COGS
A business has Total Revenue (R) of $100,000 for the quarter. Its direct costs for materials and labor (COGS) (C) were $60,000.
Calculate Gross Profit (G)
First, find the total dollar profit before overhead.
Formula: G = R – C
G = $100,000 – $60,000 = $40,000
Calculate Gross Margin (M)
Now, find what percentage of revenue that profit represents.
Formula: M = (G / R) * 100
M = ($40,000 / $100,000) * 100
Final Result
M = 0.40 * 100 = 40%. The company has a gross margin of 40%.

Frequently Asked Questions (FAQ)

Gross Margin vs. Profit Margin: What’s the difference?

Gross Margin measures Revenue minus *Cost of Goods Sold*. Profit Margin (or Net Profit Margin) measures Revenue minus *all expenses* (COGS, operating costs, interest, taxes). Gross margin shows production efficiency, while profit margin shows the overall profitability of the entire business.

What is a “good” Gross Margin?

This varies dramatically by industry. Software companies may have gross margins of 80-90%, while retail or grocery stores might have margins of 20-30%. The key is to compare your margin to your direct competitors and your own historical performance.

How can I find my Revenue?

You can use this calculator. If you know your Gross Profit (G) and your Gross Margin (M) percentage, you can solve for Revenue (R). For example, if you have $40,000 in Gross Profit and a 40% Margin, the calculator will find R = $40,000 / (40 / 100) = $100,000.

How can I improve my Gross Margin?

You have two main options: 1) Increase your prices without increasing your direct costs, or 2) Decrease your Cost of Goods Sold (COGS) by finding cheaper suppliers or improving production efficiency.

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