Gross Profit Margin Calculator
Calculate your gross profit margin by breaking down your cost of goods sold (COGS) into materials, labor, and packaging.
Cost of Goods Sold (COGS)
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What is Gross Profit Margin?
Gross profit margin shows the percentage of revenue remaining after deducting the direct costs of producing goods (COGS). It includes materials, direct labor, and packaging but not operating expenses, taxes, or interest.
Gross Profit Margin Formula
Gross Profit Margin = ((Price - COGS) ÷ Price) × 100Gross Margin Benchmarks by Sector
Gross margins vary significantly by industry:
- tools.calculators.grossProfit.benchmarks.retail
- Manufacturing: 25-35% (heavy production costs)
- Services: 50-70% (primarily labor costs)
- Software/SaaS: 70-90% (minimal production costs)
Frequently Asked Questions
What's the difference between gross margin and net margin?
Gross margin only deducts direct production costs (COGS). Net margin also deducts operating expenses, taxes, and interest.
What is a good gross margin?
It depends on your industry. Software aims for 80%+, retail for 40-50%, manufacturing for 25-35%.
What should I include in COGS?
Include raw materials, direct labor, packaging, and production overhead. Exclude marketing, admin, and sales costs.
How can I improve gross margin?
Reduce material costs, optimize production, increase prices, or switch to higher-margin products.
Why is gross margin important for investors?
Gross margin shows your core business efficiency. A declining gross margin signals pricing pressure or cost issues.
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