Gross Margin Calculator
Gross margin is the difference between revenue and cost of goods sold (COGS) divided by revenue. Gross margin is often expressed as a percentage. In other words, it is the sales revenue a company retains after incurring the direct costs associated with producing the goods it sells, and the services it provides.
Gross Margin Formula
Generally, Gross Margin is calculated as the selling price of an item, less the cost of goods sold (e.g. production or acquisition costs, not including indirect fixed costs like office expenses, rent, or administrative costs).
Gross profit margin = [ ( Revenue - Cost of goods sold ) / Revenue ] x 100
GOGS (Cost of Goods Sold) = Row Materials cost, Direct labor cost and Factory Rental expense (and etc.)
- Revenue = $500,
- Cost of goods sold = $200 and
- Revenue = $200
Gross margin (%) = [ ( $500 – $200 ) / $200 ] = 60% gross margin