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Gross margin calculator

Enter revenue and cost of goods sold (COGS) — direct costs of materials, raw goods and labor, excluding rent, marketing and other overhead. The calculator works out gross profit and gross margin.

Direct costs only — materials, raw goods, direct labor. Rent, marketing, office salaries are operating expenses and don't belong in COGS

Result

Gross margin

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Gross profit —

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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.

How it is calculated

Gross profit = revenue − cost of goods sold (COGS). Gross margin = gross profit ÷ revenue × 100% — the share of every dollar of revenue left after the direct cost of producing or buying what you sold.

COGS covers direct costs only: materials, raw goods, components, piece-rate wages of production staff. Office rent, marketing, accounting salaries and other overhead aren't part of COGS — they get subtracted later, on the way from gross profit to operating and net profit.

Gross margin shows whether a business even has room to cover overhead and turn a profit — if it's low or negative, no amount of cutting rent or ad spend will fix it: the problem is in pricing or direct product cost.

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