Gross Profit Margin Calculator
(Gross Margin, Markup & Target Price)
Enter selling price and cost of goods sold to get gross profit margin and markup. Switch modes to find the price or the highest cost a target margin allows.
Step 1 — Calculation Goal
Step 2 — Core Metrics
The total selling price per unit or revenue
Direct manufacturing or inventory purchase cost per unit
Calculated Results
Enter your values to calculate gross profit margin and markup metrics.
This gross profit margin calculator works out the share of revenue left after the direct cost of what you sold. Enter the selling price and cost of goods sold (COGS) to get gross profit, gross margin % and markup %. It also works backwards from a target margin to the price you need to charge or the most the product can cost you.
How to Calculate Gross Profit Margin
A product that sells for $100 and costs $40 has a gross profit of $60. The gross profit margin is 60 ÷ 100 × 100 = 60%. The same sale has a markup of 60 ÷ 40 = 150%, and COGS takes 40% of revenue.
The formula works the same on one unit or on a whole month. Sell 500 of those units and revenue is $50,000, COGS is $20,000, gross profit is $30,000 and the margin is still 60%.
What Counts as Cost of Goods Sold
The margin is only as accurate as the COGS figure. COGS is the direct cost of the goods or services actually sold.
| In COGS | Not in COGS (operating expenses) |
|---|---|
| Materials, or the purchase cost of stock | Rent and utilities for the office or shop |
| Direct labor to make the product or deliver the service | Salaries of management, sales and admin staff |
| Packaging | Advertising and marketing |
| Freight to bring goods in | Software, insurance and professional fees |
| Interest and income tax |
Leaving a direct cost out makes the margin look better than it is. Costs in the right-hand column come out later, on the way to net profit. The Net Profit Margin Calculator covers that step.
Pricing for a Target Gross Margin
To hit a chosen margin, work from cost to price or from price to cost.
With a cost of $40 and a 40% target, the price is 40 ÷ 0.60 = $66.67. With a price fixed at $100 and the same target, the product can cost up to 100 × 0.60 = $60.
Do not add the margin percentage to the cost. $40 plus 40% is $56, which is a 28.57% margin. The Markup vs Margin Calculator converts between the two.
Gross Profit Margin by Industry
Gross margin differs widely by what a business sells. These are averages for listed US companies from Aswath Damodaran's margins-by-sector data at NYU Stern, dated January 2026.
| Industry | Gross margin |
|---|---|
| Drugs (pharmaceutical) | 71.73% |
| Software (system and application) | 71.72% |
| Apparel | 56.88% |
| Retail (special lines) | 35.30% |
| Retail (general) | 33.18% |
| Restaurant and dining | 32.24% |
| Building materials | 30.94% |
| Retail (grocery and food) | 26.31% |
| Trucking | 21.19% |
| Engineering and construction | 15.46% |
| Food wholesalers | 15.44% |
| Auto and truck | 10.41% |
| Total market | 37.76% |
These are large public companies, and each one decides what it reports as cost of sales. A small business in the same trade can sit well above or below the average. Use the table to see roughly where an industry falls, and compare your own margin with your earlier periods.
What Gross Margin Does Not Tell You
A high gross margin does not mean a business is profitable. Rent, payroll and marketing can use up all of it. A low gross margin is workable when volume is high and overhead is small, which is how grocery and wholesale operate. Gross margin tells you how much each sale contributes. The Break-Even Point Calculator shows how many sales it takes to cover fixed costs.
How to Use the Gross Profit Margin Calculator
- Choose what to solve for: Pick gross margin, the selling price a target margin needs, or the highest COGS a target margin allows.
- Enter the known values: Type the selling price and COGS, or one of them with a target margin %. Use per-unit figures or totals for a period, but not a mix.
- Itemise COGS: Optional. Open the itemised section and enter materials, direct labor, packaging and freight, and any other direct cost. The total replaces the COGS figure.
- Add a sales volume: Optional. Enter a number of units to see total revenue, COGS and gross profit for that volume.
Frequently Asked Questions
How do I calculate gross profit margin?
Subtract cost of goods sold from revenue to get gross profit, divide by revenue and multiply by 100. A product that sells for $100 and costs $40 has a gross profit of $60 and a gross profit margin of 60 ÷ 100 × 100 = 60%.
What is the difference between gross profit and gross margin?
Gross profit is an amount of money: revenue minus cost of goods sold. Gross profit margin is that amount as a percentage of revenue. $60 of gross profit on $100 of revenue is a 60% margin.
What is included in cost of goods sold?
The direct costs of the goods or services you sold: materials or the purchase cost of stock, direct labor, packaging and freight to get the goods to you. Rent, office salaries, advertising and interest are not part of it. They are operating expenses and come out after gross profit.
What is a good gross profit margin?
It depends on the industry. In Aswath Damodaran's January 2026 data on listed US companies, gross margin averages 71.72% for system and application software, 33.18% for general retail and 26.31% for grocery and food retail. Compare against businesses that sell what you sell.
How do I find the selling price for a target gross margin?
Divide the cost by 1 minus the margin as a decimal. A product that costs $40 with a 40% target margin needs a price of 40 ÷ 0.60 = $66.67.
What is the difference between gross margin and markup?
Both use gross profit. Margin divides it by the selling price and markup divides it by cost. A $100 price on a $40 cost is a 60% margin and a 150% markup.
What is the difference between gross margin and net margin?
Gross margin takes only cost of goods sold out of revenue. Net margin also takes out operating expenses, interest and taxes, so it is the lower of the two.
Industry figures are from Aswath Damodaran's US margins-by-sector data at NYU Stern, dated January 2026, and were checked in October 2026.