Gross Profit Calculator
Gross profit is revenue after subtracting the direct cost of producing goods or services — the starting point for all profitability analysis.
How It Works
Subtracts COGS from revenue and expresses gross profit as a dollar amount and as percentage of revenue (gross margin).
Formula
Gross Profit = Revenue − COGS
Gross Margin % = (Profit / Revenue) × 100
COGS % = (COGS / Revenue) × 100
Example
Revenue $200,000 − COGS $120,000 = $80,000 gross profit (40% margin)
When to Use This Calculator
Use to track production efficiency, compare margins across product lines, or prepare a basic income statement.
Common Mistakes to Avoid
- Including operating expenses in COGS — rent and marketing go in OpEx, not COGS.
- Confusing gross with net profit — gross does not deduct operating expenses, interest, or taxes.
- Relying on gross margin alone — high gross margin with high overhead can still produce net losses.
Frequently Asked Questions
What is in COGS?
Direct materials, direct labor, manufacturing overhead. NOT SG&A expenses.
Good gross margin by industry?
Software: 70–90%. Retail: 30–50%. Manufacturing: 20–40%. Grocery: 25–30%.
How investors use gross profit?
To evaluate scalability — high gross margins allow room for growing operating expenses.
Gross profit vs EBITDA?
Gross profit = Revenue − COGS. EBITDA deducts operating expenses and adds back D&A.
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Last Updated: July 4, 2026