Gross Profit Calculator
Calculate gross profit, margin, and analyze your business profitability
Calculate Gross Profit
Quick Industry Examples
Total sales or revenue from operations
Direct costs of producing goods/services
Very healthy gross profit margin. Continue monitoring costs and look for opportunities to optimize further.
Revenue Breakdown
Key Metrics
Formulas Used
Gross Profit: Revenue - Cost of Goods Sold
Gross Profit Margin: (Gross Profit ÷ Revenue) × 100%
COGS Percentage: (COGS ÷ Revenue) × 100%
Example Calculation
Retail Store Example
Calculation Steps
Step 1: Calculate Gross Profit
Gross Profit = $500,000 - $300,000 = $200,000
Step 2: Calculate Gross Profit Margin
Margin = ($200,000 ÷ $500,000) × 100% = 40%
Step 3: Calculate Profit Per Dollar
Per Dollar = $200,000 ÷ $500,000 = $0.40
Interpretation
This retail store has a 40% gross profit margin, meaning for every dollar of sales, $0.40 is gross profit available to cover operating expenses and generate net profit. This is considered a healthy margin for retail businesses.
Industry Benchmarks
Benchmarks vary by specific industry segment and business model
Improve Your Gross Profit
Negotiate better prices with suppliers to reduce COGS
Optimize pricing strategy based on value and competition
Reduce waste in production and inventory management
Improve product mix by focusing on higher-margin items
Streamline operations to reduce direct labor costs
Monitor regularly and adjust quickly to market changes
Understanding Gross Profit
What is Gross Profit?
Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. It represents the amount of money left over from revenue after accounting for the cost of goods sold (COGS).
Why It Matters
- •Indicates pricing power and production efficiency
- •Shows how well you manage direct costs
- •Essential for covering operating expenses and generating net profit
- •Key metric for comparing with industry competitors
Gross Profit Formula
Gross Profit = Revenue - COGS
Gross Margin % = (Gross Profit ÷ Revenue) × 100
What's Included in COGS?
- •Direct materials: Raw materials and components
- •Direct labor: Wages for production workers
- •Manufacturing overhead: Factory costs directly tied to production
- •Shipping: Freight-in costs for materials
High Gross Margin (50%+)
Strong pricing power, low production costs, or high-value products/services. Common in software, consulting, and luxury goods.
Moderate Margin (25-50%)
Typical for many businesses with reasonable pricing and cost control. Common in retail, professional services, and light manufacturing.
Low Margin (<25%)
High competition, commodity products, or high production costs. Common in grocery, wholesale, and heavy manufacturing.
Gross Profit vs. Net Profit
Gross Profit
- • Revenue minus COGS only
- • Focuses on production efficiency
- • Before operating expenses
- • Measures product profitability
Net Profit
- • After ALL expenses and taxes
- • Measures overall company profitability
- • Bottom line on income statement
- • What shareholders actually earn