What the Gross Profit Calculator Does
This free Gross Profit Calculator works out two key figures for your business: your gross profit (in dollars) and your gross profit margin (as a percentage). You enter just two numbers — your total Revenue and your Cost of Goods Sold — and the tool instantly returns how much money is left over after covering the direct costs of producing what you sold. It's a fast way to gauge the underlying profitability of a product, a service line, or a whole business before fixed overheads and taxes are taken into account.
The Inputs Explained
- Revenue ($): The total amount of money earned from sales before any deductions — your gross sales figure for the period.
- Cost of Goods Sold ($): The direct costs of producing the goods sold, such as raw materials, manufacturing labour and components. It excludes indirect costs like rent, marketing or admin salaries.
The Formula
The calculator uses two standard accounting formulas:
- $$\text{Gross Profit} = \text{Revenue} - \text{Cost of Goods Sold}$$
- $$\text{Gross Profit Margin (\%)} = \frac{\text{Gross Profit}}{\text{Revenue}} \times 100$$
The dollar figures are displayed formatted to your local currency, while the margin is shown as a percentage.
Worked Example
Suppose your shop earned $50,000 in revenue and the cost of goods sold was $30,000.
- $$\text{Gross Profit} = \$50{,}000 - \$30{,}000 = \$20{,}000$$
- $$\text{Gross Profit Margin} = \frac{\$20{,}000}{\$50{,}000} \times 100 = 40\%$$
This tells you that for every dollar of sales, 40 cents remains to cover operating expenses and contribute to net profit.
Frequently Asked Questions
Is gross profit the same as net profit? No. Gross profit only subtracts the direct cost of goods sold. Net profit goes further and deducts all other expenses such as rent, wages, marketing, interest and taxes.
What counts as Cost of Goods Sold? COGS includes only costs tied directly to producing or buying what you sell — materials, direct labour and freight-in. Overheads like office rent or advertising are not included.
What is a good gross profit margin? It varies widely by industry. Retail often runs lower, while software and services can be very high. Comparing your margin against competitors in the same sector is more useful than a single benchmark.
