How does the Gross Profit Calculator work?
Gross profit equals revenue minus cost of goods sold. Gross margin divides gross profit by revenue. These measures focus on the relationship between sales and the direct or product costs classified as COGS before other operating expenses.
For a broader bottom-line result, use the Net Profit Calculator.
What belongs in cost of goods sold?
COGS depends on the type of business and accounting method. It generally relates to costs directly associated with goods or services sold, while many selling, administrative and other operating costs are presented elsewhere. Use your accounting records rather than guessing classifications.
The Inventory Turnover Calculator also uses COGS when comparing it with average inventory.
How is gross margin different from markup?
Gross margin divides gross profit by revenue. Markup divides profit above cost by cost. If you are evaluating unit pricing rather than financial-statement gross profit, use the Markup Calculator.
What can change gross profit over time?
Selling prices, product mix, supplier costs, freight, production efficiency, discounts and accounting classifications can all affect gross profit. The Profit Margin Calculator can be used for a simpler revenue-versus-total-cost scenario.
Frequently asked questions about Gross Profit
Gross profit is revenue minus cost of goods sold.
Gross margin is gross profit divided by revenue, expressed as a percentage.
No. Net profit also reflects operating expenses and other costs or income beyond COGS.
Yes. If COGS exceeds revenue, the result is a gross loss.
No. Gross margin uses revenue as the denominator; markup uses cost.
Only payroll amounts that your accounting method classifies in COGS should be included in the COGS figure used here.
Yes, if you have a consistent definition of direct cost or cost of services sold.
No. It calculates from the figures entered and does not decide financial-reporting classification.
Sources and methodology
The calculator uses the formulas described on this page and the values you enter. The sources below provide authoritative U.S. context for business planning, tax, recordkeeping or financial-statement concepts.