Calculate gross profit margin from revenue and COGS
Calculate your business gross margin to assess production efficiency. Gross margin, also called gross profit margin, shows what percentage of revenue remains after cost of goods sold (COGS). It is different from net profit margin because operating expenses, interest, and taxes are not included.
Key aspects of gross margin analysis:
To calculate gross profit margin, subtract COGS from revenue to get gross profit, then divide gross profit by revenue and multiply by 100. For example, revenue of $500,000 and COGS of $300,000 gives gross profit of $200,000 and gross margin of 40%.
Direct materials, labor, and manufacturing overhead.
Profit per unit sold after production costs.
Margin = Profit/Revenue. Markup = Profit/COGS.
Compare against industry standards.
| Metric | Formula | Use |
|---|---|---|
| Gross margin | (Revenue - COGS) / Revenue | Measures profit left after direct product costs. |
| Markup | (Revenue - COGS) / COGS | Shows how much selling price is above cost. |
| Net margin | Net profit / Revenue | Measures final profitability after operating expenses, interest, and tax. |
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