Profit Margin Calculator - Calculate Net & Gross Margin
Free online profit margin calculator. Calculate gross profit, profit margin percentage, and markup percentage from cost and revenue instantly.
Inputs
🔒 Local ProcessingHow to Use This Calculator
- Enter the total cost required to acquire or produce the item (Cost of Goods Sold).
- Enter the selling price or gross revenue generated from the sale.
- Inspect the absolute profit, gross profit margin percentage, and cost markup percentage.
Formula & Mathematical Method
Margin calculates profit as a percentage of the selling price, while markup calculates profit as a percentage of the cost price.
Margin (%) = [ (Revenue - Cost) / Revenue ] × 100 | Markup (%) = [ (Revenue - Cost) / Cost ] × 100Explanation of Variables
| Symbol | Variable Name | Description & Role in Calculation |
|---|---|---|
| Cost | Cost of Goods Sold (COGS) | Direct acquisition or production cost per unit. |
| Revenue | Selling Price / Revenue | Gross cash received from the customer per unit. |
| Profit | Net Dollar Profit | Gross revenue minus cost of goods sold. |
| Margin | Profit Margin (%) | Profit expressed as a percentage of selling price. |
| Markup | Markup (%) | Profit expressed as a percentage of cost. |
Worked Calculation Examples
Standard Retail Product
Scenario: Item purchased at $100 wholesale and retailed at $150.
Interpretation of Results
Profit margin and markup measure profitability from different perspectives. Profit margin reflects how much of each dollar of revenue is retained as profit, while markup reflects the percentage added onto cost to determine selling price.
Profit Margin (%)
The percentage of gross revenue remaining after paying cost of goods sold.
Key Context: Margin can never exceed 100%, whereas markup can easily exceed 100%.
Markup (%)
The percentage by which cost is increased to establish the retail selling price.
Key Context: Use markup when pricing inventory to ensure overhead expenses are covered.
Practical Use Cases
E-commerce & Retail Pricing Strategy
Set retail price points that achieve target operating margins after wholesale purchase costs.
Financial Statement Analysis
Audit product line profitability and compare gross margins against industry sector benchmarks.
Limitations & Key Assumptions
- Evaluates gross unit economics; does not deduct operating overhead (rent, utilities, administrative salaries) or income taxes.