Gross Margin Calculator

Behind the result

About this Tool

Turn revenue and cost of goods sold into gross profit dollars and a gross margin percentage.

How it works

Subtracts cost of goods sold from revenue, then divides gross profit by revenue.

Worked example

For $10,000 in revenue and $6,000 in cost of goods sold, gross profit is $4,000. Divide $4,000 by $10,000 and multiply by 100 to get a 40% gross margin. That leaves 40 cents of each revenue dollar before other expenses.

Assumptions and limits

Enter revenue and its associated cost of goods sold for the same period and in the same currency. Gross profit is not net income: this calculation does not subtract other operating expenses, interest or taxes. Revenue must be positive to calculate a meaningful percentage.

Is a 40% margin the same as a 40% markup?

No. Margin divides profit by revenue; markup divides profit by cost. In the example, $4,000 ÷ $6,000 gives about 66.7% markup, while the margin is 40%. Use the Markup vs Margin Converter below when comparing the two.

Reference and maintenance

BDC: gross margin definitions and formula

Guidance maintained by OnTap. Content updated September 17, 2026.

Use results as a practical aid, and verify important decisions against your own source data and qualified guidance.