Gross profit is the first profit line on every income statement, and the one that tells you whether the core business actually makes money before overhead, payroll, marketing, taxes and interest are paid. This calculator takes two simple numbers — your total revenue and your cost of goods sold (COGS) — and returns your gross profit in dollars and your gross margin as a percentage, so you can judge product economics at a glance.
Type a revenue figure and a COGS figure and the result updates instantly. Whether you are a small-business owner pricing a new product, an investor comparing two companies, or a student studying a 10-K, the math is the same: revenue minus what it cost you to deliver the product.
How to Use
- Enter your Total Revenue — the net sales for the period, after returns, discounts and allowances. Use annual figures for a full-year view, or a single month for a quick sanity check.
- Enter your Cost of Goods Sold (COGS) — the direct costs to produce the goods or services you sold. For a product company this is materials, direct factory labor and manufacturing overhead. For a restaurant it is food and beverage cost plus kitchen wages. For a SaaS company it is hosting, third-party APIs and customer-support labor directly tied to delivery.
- Enter Units Sold for the period if you want per-unit economics. Leave it at 1 if you only have period totals. The field drives revenue per unit, COGS per unit, and gross profit per unit.
- Read Gross Profit — the dollar amount left after COGS is subtracted from revenue.
- Read Gross Margin — that gross profit expressed as a percentage of revenue. This is the number investors compare across companies and industries.
- Compare COGS as % of Revenue — the flip side of gross margin. If COGS is 60% of sales, gross margin is 40%.
- Check Gross Profit per $1 of Revenue — how many cents drop to the gross-profit line for every dollar of sales, plus the per-unit figures if you entered units sold.
The result card updates as you type. If revenue is zero or negative the engine shows an error instead of dividing by zero.
The Gross Profit Formula
Gross profit is the simplest profit definition in accounting:
Gross Profit = Revenue − Cost of Goods Sold
And gross margin converts that dollar result into a comparable ratio:
Gross Margin = (Gross Profit / Revenue) × 100%
Worked example: a business books $500,000 in net revenue for the year, and its direct production costs (materials, factory labor, factory overhead) total $300,000. Gross profit is $500,000 − $300,000 = $200,000. Gross margin is $200,000 / $500,000 = 40%. That means for every dollar of sales, 60 cents went straight out the door to build the product and 40 cents remain to cover rent, salaries, marketing, taxes and — hopefully — profit.
If COGS exceeds revenue, gross profit is negative and gross margin is negative. That is a gross loss: the product costs more to make than the price it sells for, before a single overhead dollar is considered.
What Counts as COGS (and What Doesn't)
COGS is easy to misclassify. The dividing line is directly traceable to producing the product:
- In COGS: raw materials, components, manufacturing labor, factory utilities, factory rent, equipment depreciation on production lines, wholesale purchases for resale businesses, shipping to customers, and payment processing directly tied to a sale.
- Not in COGS (these are operating expenses): head-office rent, sales and marketing salaries, advertising, accounting and legal, executive pay, software subscriptions unrelated to delivery, R&D that is not capitalized, and interest.
Putting marketing spend into COGS artificially depresses your gross margin; leaving factory labor out inflates it. Either mistake makes your margins look unlike your peers and distorts pricing decisions.
Gross Profit vs Net Profit
Gross profit is only the first cut. The full waterfall runs:
- Gross Profit = Revenue − COGS
- Operating Profit = Gross Profit − Operating Expenses (SG&A, R&D, marketing)
- Net Income = Operating Profit − Interest − Taxes
A 60% gross margin software company can still lose money if sales and marketing spend is 80% of revenue. A 25% gross margin grocery chain can be quietly profitable on high volume. Gross margin tells you about unit economics; net margin tells you about the whole business. Use this calculator for the first, and compare it to a net-margin tool for the second.
Examples
Example 1 — The default small-business case. A boutique brand does $500,000 in annual revenue and spends $300,000 on inventory, manufacturing labor and packaging. Gross profit is $200,000 and gross margin is 40%. The owner now knows that, after building the product, 40 cents of every dollar is left to cover studio rent, two salaries, ads and taxes.
Example 2 — A high-volume, low-margin retailer. A grocery store rings up $2,500,000 in sales and pays $1,200,000 to suppliers. Gross profit is $1,300,000 and gross margin is 52%. That sounds healthy for groceries, where 20–30% is more typical — the difference comes from a private-label line that carries much higher margins than national brands.
Example 3 — A losing product. A startup launches a gadget priced at $100 with bill-of-materials and fulfillment cost of $150. On $100,000 of revenue, COGS is $150,000. Gross profit is −$50,000 and gross margin is −50%. Every unit sold loses $50 before overhead — a pricing or supply-chain problem, not a marketing one.
Example 4 — Digital product near 100% margin. An ebook author earns $200,000 in royalties with essentially no per-unit COGS (hosting and delivery are bundled into the platform). Gross profit is $200,000 and gross margin is 100%. Software and digital products can approach this ceiling, which is why they scale so differently from physical goods.
FAQ
How do I calculate gross profit?
Subtract cost of goods sold (COGS) from total revenue: Gross Profit = Revenue − COGS. Then divide gross profit by revenue and multiply by 100 to get gross margin. For example, $500,000 in revenue minus $300,000 in COGS equals $200,000 gross profit, or 40% gross margin.
What is a good gross margin?
It depends entirely on the industry. Software and SaaS companies often run 60–85% gross margins; grocery stores run 20–30%; restaurants run 60–70% on food but lose most of it to labor and rent. The right benchmark is your direct competitors, not an arbitrary number online.
What is the difference between gross profit and net profit?
Gross profit only subtracts COGS (the direct cost to make the product). Net profit subtracts all expenses: operating costs like rent and marketing, plus interest and taxes. A business can have strong gross profit and still be unprofitable at the net line because overhead is too high.
Is salary included in COGS?
Direct production labor (factory workers, assembly line, kitchen staff) is in COGS. Sales, marketing, executive and administrative salaries are not — those are operating expenses. If a worker's time directly produces the item you sold, their labor belongs in COGS.
Does gross profit include operating expenses?
No. Operating expenses (SG&A, marketing, R&D, head-office rent) are deducted after gross profit, to arrive at operating profit. Gross profit intentionally isolates the cost of producing the product from the cost of running the company.
Can gross profit be negative?
Yes. If COGS exceeds revenue, gross profit is negative and gross margin is negative. This means each sale costs you more to fulfill than the price you charge — a structural problem with pricing, sourcing or product mix that must be fixed before overhead is even considered.
How does gross profit differ from gross margin?
Gross profit is an absolute dollar amount (revenue minus COGS). Gross margin is that dollar amount expressed as a percentage of revenue. Gross profit tells you the size of the pool; gross margin lets you compare efficiency across companies of different sizes.
Disclaimer
This gross profit calculator is provided for informational purposes only and does not constitute accounting, tax, legal or financial advice. Results are based solely on the revenue and COGS figures you enter; the exact definition of COGS varies by accounting policy, industry and jurisdiction, and real financial statements include additional line items this tool does not model. Always consult a qualified accountant or financial professional before making business, investment or pricing decisions based on these figures.