This gross margin calculator helps you understand profitability by showing how much of every dollar of revenue is left after covering the direct cost of goods sold (COGS). Enter revenue and COGS to instantly compute gross profit, gross margin percentage, and markup. Use it to price products, evaluate discounts, compare vendors, and monitor margin drift over time. Includes guidance for target margins by industry and tips to improve unit economics without hurting conversion.
Gross Margin Calculator
Calculate profit margins, analyze pricing strategies, and optimize your business profitability
Financial Inputs
Margin Analysis
Gross Margin
40.00%
Status: Good
Gross Profit
$40,000
Gross Markup
66.67%
Net Margin
20.00%
Break-Even Point
$50000
Margin of Safety
50.0%
Revenue Breakdown
Unit Economics
Price per Unit
$100.00
Cost per Unit
$60.00
Contribution Margin
$40.00
Understanding Gross Margin
What is Gross Margin?
Gross margin represents the percentage of revenue that exceeds the cost of goods sold (COGS). It's a critical metric that measures how efficiently a company produces and sells its products or services.
The formula is: Gross Margin = ((Revenue - COGS) / Revenue) × 100
Why Gross Margin Matters
- • Profitability Indicator: Shows how much profit is available to cover operating expenses
- • Pricing Power: Higher margins indicate strong pricing power or cost efficiency
- • Competitive Advantage: Companies with higher margins have more flexibility
- • Investment Decisions: Investors use margin trends to evaluate business health
- • Operational Efficiency: Tracks improvements in production and supply chain
Industry Standards
Improving Your Margin
Related Financial Metrics
Gross Markup
The percentage of profit relative to cost: ((Revenue - COGS) / COGS) × 100
Net Margin
Profit after all expenses: ((Revenue - All Expenses) / Revenue) × 100
Contribution Margin
Revenue minus variable costs, showing profit per unit sold
Common Mistakes to Avoid
Margin is profit as % of revenue; markup is profit as % of cost
Include all direct costs in COGS for accurate calculations
Consider absolute profit dollars and volume as well
Monitor margin changes over time to spot issues early
Frequently Asked Questions
What is a good gross margin?
It varies by industry: software often 70–90%, manufacturing 20–40%, retail 20–35%.
Benchmark against peers and track month‑over‑month trends rather than chasing a single number.
Gross margin vs markup—what's the difference?
Gross margin is gross profit divided by revenue; markup is gross profit divided by cost.
A 33% margin equals a 50% markup on the same item.
Should shipping be in COGS?
If shipping is required to get the product ready for sale, include it in COGS; otherwise treat it as operating expense.
Be consistent for comparability.
How do discounts impact margin?
A 10% discount can reduce margin far more than expected.
Use the calculator to test scenarios and adjust price, cost, or volume to preserve profitability.
How often should I review margins?
Review at least monthly by SKU or segment.
Margin erosion often comes from cost creep, freight changes, or mix shift—early detection matters.
What's a quick way to improve margins?
Negotiate input costs, streamline packaging/shipping, raise prices on low‑elasticity items, and reduce returns.
Even 1–2 pts lift compounds materially.
About This Page
Editorial & Updates
- Author: SuperCalc Editorial Team
- Reviewed: SuperCalc Editors (clarity & accuracy)
- Last updated: 2026-01-13
We maintain this page to improve clarity, accuracy, and usability. If you see an issue, please contact hello@supercalc.dev.
Financial/Tax Disclaimer
This tool does not provide financial, investment, or tax advice. Calculations are estimates and may not reflect your specific situation. Consider consulting a licensed professional before making decisions.