Gross Profit Calculator
- Cost of goods sold
- Gross profit
Gross profit pays for rent, wages, marketing and other operating costs; what's left after those is net profit. Use the profit margin calculator to go on to net margin.
How the gross profit calculation works
Start with net sales
Gross sales of $52,000 minus $1,500 of returns and $500 of discounts is $50,000 of net sales.
Subtract cost of goods sold
With $30,000 of COGS, gross profit is $50,000 − $30,000 = $20,000.
Divide by net sales for the margin
$20,000 ÷ $50,000 = 40% gross profit margin.
No COGS figure? Use inventory
Beginning inventory $10,000 + purchases $32,000 − ending inventory $12,000 = $30,000 of COGS.
Worked example. A shop with $52,000 of sales, $1,500 of returns and $500 of discounts has $50,000 of net sales. Its goods cost $30,000, so gross profit is $20,000: a 40% gross margin and a 66.67% markup on cost.
Gross Profit FAQ
What is the gross profit formula?
Gross profit = net sales − cost of goods sold. Net sales are your sales after returns, allowances and discounts.
How do I calculate gross profit margin?
Gross profit margin = gross profit ÷ net sales × 100. $20,000 of gross profit on $50,000 of sales is a 40% gross margin. The same number is often called gross profit percentage or gross margin.
What is a good gross profit margin?
It depends on the industry. For US listed companies in January 2026, NYU Stern data shows average gross margins of 33.18% for general retail, 26.31% for grocery and food, 32.24% for restaurants and 37.76% across the whole market. Compare your margin with your own past periods and with businesses like yours, and check it still covers your operating costs.
What's the difference between gross profit and net profit?
Gross profit is sales minus the cost of the goods sold. Net profit also takes off operating expenses such as rent, wages and marketing, plus interest and taxes.
What's the difference between gross margin and markup?
Both use gross profit, but margin divides it by sales and markup divides it by cost. $20,000 of profit on $30,000 of cost is a 66.67% markup but a 40% margin.
What goes into cost of goods sold?
The direct cost of what you sold: products bought for resale, materials and direct labor to make them. Rent, marketing and office costs are operating expenses, not COGS.
How do I work out COGS from inventory?
Beginning inventory + purchases − ending inventory. Choose "Work it out from inventory" above, or use the COGS calculator for more detail.
Sources: NYU Stern (Damodaran): Margins by sector, US, January 2026