Gross Margin Calculator
Enter what an item costs and what it sells for to get its gross margin, gross profit and markup. Below are a margin calculator that sets a price from your cost, a markup-to-margin converter, a profit margin calculator (gross, operating and net) and a blended margin for several products.
Gross margin calculator
Margin calculator: selling price from cost
Markup calculator: convert markup and margin
Profit margin calculator: gross, operating and net
Blended margin across products
| Product | Units | Price ($) | Unit cost ($) | Margin |
|---|---|---|---|---|
Gross margin formula
Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. Selling for $100 something that cost $60 leaves $40 of gross profit, a 40% gross margin. Markup divides the same $40 by the cost instead: $40 ÷ $60 = 66.67%. Margin can never reach 100%; markup can be any size.
| Margin | Same as markup of | Price for a $60 cost |
|---|---|---|
| 10% | 11.11% | $66.67 |
| 20% | 25.00% | $75.00 |
| 25% | 33.33% | $80.00 |
| 30% | 42.86% | $85.71 |
| 40% | 66.67% | $100.00 |
| 50% | 100.00% | $120.00 |
| 60% | 150.00% | $150.00 |
| 70% | 233.33% | $200.00 |
Gross margin only counts the direct cost of what you sell (materials, wholesale cost, direct labor). Operating margin also takes out rent, salaries and other running costs, and net profit margin takes out interest and taxes too, so it's always the smallest of the three.
Common questions
How do I calculate gross margin?
Subtract the cost of goods from revenue, divide by revenue and multiply by 100. ($100 − $60) ÷ $100 = 40%.
What is the difference between margin and markup?
Both use the same profit, but margin divides it by the selling price and markup divides it by the cost. A $60 item sold for $100 has a 40% margin and a 66.67% markup.
How do I price a product for a 40% margin?
Divide the cost by 1 minus the margin: $60 ÷ 0.60 = $100. Multiplying the cost by 1.40 gives only a 28.6% margin.
What is a good profit margin?
It depends on the industry. Grocers often run on low single-digit net margins while software firms can be far higher, so compare with businesses like yours.
Is profit margin the same as gross margin?
Not usually. 'Profit margin' often means net profit margin, after all expenses, interest and taxes. Gross margin only subtracts the cost of goods sold.
Sources
- U.S. Small Business Administration: Calculate your startup costs and pricing
- SEC Investor.gov: Gross margin and financial statements
Related
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.