Profit Margin Calculator
Work out gross margin and markup from revenue and cost, or find the selling price that hits a target margin or markup.
What this calculator measures
It has two modes. Pick margin and markup if you know what you sold for and what it cost: enter your revenue and your cost of goods sold (COGS) and it returns:
- Gross profit = revenue − COGS.
- Gross margin percentage = gross profit ÷ revenue × 100.
- Markup = gross profit ÷ COGS × 100.
Pick selling price if you are setting a price: enter the cost and the margin or markup you want, and it returns the price to charge, with the matching profit, margin and markup.
For example, revenue of $100 and COGS of $60 gives a gross profit of $40 and a gross margin of 40%. If COGS is higher than revenue the result is negative: each sale loses money before any other cost is counted. Revenue must be greater than zero.
Why use a margin calculator
- Check a price. See what a quote leaves you after the direct cost of making or buying the product.
- Compare products, customers or lines. Revenue alone hides which ones actually earn their keep.
- Spot a squeeze early. Re-run it when material, freight or labor costs change, before the change shows up in your monthly numbers.
Margin vs. markup
Margin and markup both come from gross profit, but they divide by different things. Margin divides by revenue. Markup divides by COGS, so it is always the larger number. A 25% markup is not a 25% margin: it is a 20% margin. Pricing a product with the wrong one is a common way to end up under your target.
| Markup on cost | Gross margin |
|---|---|
| 10% | 9.1% |
| 20% | 16.7% |
| 25% | 20% |
| 33.3% | 25% |
| 42.9% | 30% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
To convert, margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). To price from a target margin, divide cost by (1 − target margin): a product that costs $60 to make, priced for a 40% margin, sells for $60 ÷ 0.6 = $100. The calculator does this for you in its selling price mode.
What counts as COGS for a manufacturer
For a manufacturer, COGS normally includes the direct materials in the product, the direct labor to make it, and the manufacturing overhead applied to it. Selling, marketing and administrative costs are operating expenses and sit below gross margin. Overhead is the part most often left out or guessed at. The manufacturing overhead rate calculator shows how to work out the rate to apply.
Common questions
Is this gross margin or net margin?
Gross margin. It leaves out operating expenses, interest and taxes, which net margin subtracts as well. Because it stops at COGS, gross margin is the better measure of whether a product's price covers what it costs to make.
What is a good profit margin?
It varies a lot by industry and by how much of your cost is fixed. Compare against businesses like yours, not an overall average. The article below gives typical ranges for manufacturing, 3PL and distribution.
Where do I find my COGS?
Your accounting system reports it for a period. For a single product, add up the materials, direct labor and applied overhead for one unit. Accurate figures depend on accurate production and inventory records, which is where ASC's Manufacturing Execution System (MES) helps.
For a longer walk-through of gross vs. net margin, markup and industry benchmarks, read Profit Margin Calculator: Easily Determine Gross Margin & Markup.
This calculator is for estimation and education. Check your own figures before making pricing or financial decisions.