Gross Profit Calculator
Calculate gross profit and gross profit margin from revenue and cost of goods sold. Essential for business financial analysis and understanding profitability.
Total sales revenue
Direct costs of producing goods
What is Gross Profit?
Gross profit is the profit a business makes after deducting the costs directly associated with making and selling its products or services. It's calculated as Revenue minus Cost of Goods Sold (COGS).
Gross profit margin is the percentage of revenue that remains after COGS. It's a key indicator of a company's financial health and pricing strategy effectiveness.
How to Use the Gross Profit Calculator
- Enter revenue: Input your total sales revenue or income from sales.
- Enter cost of goods sold: Input the direct costs of producing or purchasing the goods sold (materials, labor, manufacturing costs).
- Calculate: Click "Calculate Gross Profit" to see your gross profit amount and gross profit margin percentage.
Understanding Gross Profit
Gross Profit
Gross Profit = Revenue - Cost of Goods Sold. This is the profit before operating expenses, taxes, and other indirect costs are deducted.
Gross Profit Margin
Gross Profit Margin = (Gross Profit / Revenue) × 100. This percentage shows how efficiently a company produces goods and how much profit is made per pound of revenue.
Cost of Goods Sold (COGS)
COGS includes direct costs like raw materials, direct labor, and manufacturing overhead. It excludes indirect costs like marketing, administration, and rent.
Frequently Asked Questions
What's included in cost of goods sold?
COGS includes direct costs: raw materials, direct labor wages, manufacturing overhead, and shipping costs for products. It excludes indirect costs like marketing, rent, utilities, and administrative expenses.
What's a good gross profit margin?
Gross profit margins vary by industry. Generally, 20-30% is considered good, though software companies may have 70-80% margins while retailers might have 10-20% margins.
How is gross profit different from net profit?
Gross profit is revenue minus COGS. Net profit is gross profit minus all operating expenses, taxes, and interest. Net profit is always lower than gross profit.
Why is gross profit important?
Gross profit shows how efficiently a company produces goods and whether pricing covers production costs. It's essential for pricing decisions and identifying cost management opportunities.
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