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Calculate your gross profit and gross margin to see how much you keep after covering direct costs.
Note: Gross profit is revenue minus cost of goods sold (COGS). COGS includes only direct costs like materials, direct labor, and production costs. Operating expenses like rent, salaries, and marketing are subtracted later to calculate net income. Track your gross margin monthly to catch cost increases early. For bookkeeping support, contact EpicBooks.
Gross profit is the money left over after you subtract the direct costs of producing your goods or services from your revenue. The formula is simple: Revenue minus Cost of Goods Sold equals Gross Profit.
Gross profit margin, expressed as a percentage, tells you how efficiently you turn revenue into profit before operating expenses. A 40% gross margin means you keep 40 cents of every dollar after covering direct costs like materials, production labor, and shipping.
What counts as COGS depends on your business. For product businesses, it includes inventory, manufacturing costs, and freight. For service businesses, it’s typically the direct labor and contractor costs to deliver the service. Operating expenses like rent, marketing, and administrative salaries are not included in COGS.
Healthy gross margins vary by industry. Software companies often see margins above 70%, while restaurants and retailers typically run between 25% and 50%. Knowing your industry benchmark helps you understand whether your pricing and cost structure are competitive.
Disclaimer: This calculator provides estimates for planning purposes. Gross profit differs from net income, which also accounts for operating expenses, interest, and taxes. For accurate financial reporting, ensure your COGS calculations follow proper accounting standards. Consult with a bookkeeper or accountant to properly categorize your expenses.
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