Gross Margin Calculator
Free gross margin calculator: enter revenue and COGS to get gross profit and margin percentage, with optional per-unit economics for pricing decisions.
Revenue for the period (month, quarter, or year - just be consistent).
Direct costs only: materials, direct labor, hosting, payment fees.
Optional - enables per-unit results. Enter 0 to skip.
Results
Gross profit
$75,000
- Gross margin
- 62.5%
- Revenue per unit
- $120
- Cost per unit
- $45
- Gross profit per unit
- $75
Every dollar of revenue keeps 62.5 cents after direct costs - a 62.5% gross margin leaving $75,000 to fund operating expenses, or $75 per unit. Benchmarks vary widely by industry, so compare against peers, not a universal number.
Free and instant - nothing is stored or sent. Estimates for planning purposes, not accounting, tax, or investment advice.
Gross margin is the share of each revenue dollar that survives the direct cost of delivering the product or service. It is the first number a lender, buyer, or investor computes from your P&L, because it defines how much room the business model has for everything else - payroll, marketing, rent, and profit.
Enter revenue and cost of goods sold to get gross profit and margin percentage. Add a unit count and the calculator also breaks the economics down per unit - the view that makes pricing decisions concrete.
What gross margin measures
Gross profit = revenue − cost of goods sold. Gross margin = gross profit ÷ revenue × 100. COGS includes only costs that scale directly with delivery: materials, direct labor, hosting, payment processing - not rent, admin salaries, or marketing.
With the defaults - $120,000 of revenue against $45,000 of COGS - gross profit is $75,000 and gross margin is 62.5%. Per unit, at 1,000 units: $120 of revenue, $45 of cost, $75 of gross profit each.
Margin vs. markup - the classic confusion
Margin is profit as a share of the selling price; markup is profit as a share of cost. A product bought for $45 and sold for $120 has a 62.5% margin but a 167% markup. Mixing them up systematically underprices: applying a "60% margin" as a 60% markup yields only a 37.5% margin.
When someone quotes you a percentage, always ask: of price, or of cost?
How to interpret the result
Gross margin norms vary enormously by industry - software commonly runs 70–85%, professional services 50–70%, retail and distribution far lower - so compare against your industry, not a universal number. What is universal: the trend should be flat or rising.
A declining gross margin with stable pricing usually means input costs are creeping or the product mix is shifting toward lower-margin work. Catch it at the monthly close, because a two-point margin slide costs more than most expense lines.
Frequently asked questions
What is the difference between gross margin and gross profit?
Gross profit is a dollar amount: revenue minus cost of goods sold. Gross margin is that profit expressed as a percentage of revenue. $120,000 of revenue with $45,000 of COGS gives $75,000 of gross profit and a 62.5% gross margin.
What counts as COGS for a service or software business?
Costs that scale directly with serving customers: hosting and infrastructure, third-party API fees, payment processing, customer support staff, and for services, the delivery team’s direct labor. Sales, marketing, R&D, and admin belong below the gross profit line.
What is a good gross margin?
It depends on the industry. Commonly cited ranges: 70–85% for software, 50–70% for professional services, 25–50% for restaurants and light manufacturing, and thinner for retail and distribution. Within any industry, higher-than-peer margin usually reflects pricing power or delivery efficiency.
How is margin different from markup?
Margin divides profit by the selling price; markup divides profit by the cost. Selling at $120 what costs $45 is a 62.5% margin and a 167% markup. To hit a target margin m, the price must be cost ÷ (1 − m) - not cost × (1 + m).
Keep going
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