Gross Margin Calculator

Gross margin in currency and percentage.

Calculate gross margin in both absolute and percentage terms from revenue and cost of goods sold, across single or multiple units.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Revenue

Cost of goods sold

Units sold

Gross margin

56.0%

$28,000 gross profit

Gross profit$28,000

Gross profit per unit$22.40

Average selling price$40.00

Average unit cost$17.60

Across a catalogue, divide total profit by total revenue. Averaging individual product margins weights a small item the same as a large one.

How the Gross Margin Calculator works

Gross margin gets used to mean both the money left after cost of goods and the percentage that money represents. Both are useful and they answer different questions, the amount tells you what the sale earned, the percentage tells you whether the pricing works.

Also known as: GM calculator · gross margin dollars · gross margin formula · margin calculator · margin formula · find margin · cost margin calculator

Written out

Gross margin is revenue less cost of goods sold, divided by revenue. On a single product: (price − unit cost) ÷ price. Across a business: (revenue − total cost of goods) ÷ revenue.

The single-product and whole-business versions can differ substantially, and the difference is mix. A business whose products range from 35% to 70% gross margin will report a blended figure that matches no individual product, and that blended figure moves whenever the sales mix does.

In practice

Three products. A sells 400 units at $20 with $9 cost: 55% margin, $4,400 of gross profit. B sells 150 at $60 with $27: 55% margin, $4,950. C sells 900 at $8 with $4.40: 45% margin, $3,240.

Total revenue is $24,200 and total gross profit $12,590, giving a blended gross margin of 52%. No product carries 52%.

Now suppose C's volume doubles. Blended margin falls to 50.1% while every product's margin is unchanged. A management report showing that fall as a margin problem would be describing a mix shift, and any action taken on the pricing of A and B would be solving the wrong thing.

The limitations

Gross margin excludes everything between the warehouse and the customer. On a business where fulfilment and payment processing take 15% of revenue, a 52% gross margin is a 37% contribution margin, and the second number is the one that governs pricing and discount decisions.

It is also sensitive to how returns are handled. Netting returns off revenue lowers the figure; treating the returned goods as a separate write-off leaves gross margin unchanged and moves the cost elsewhere. Both appear in practice, and comparing across businesses without knowing which is being used is unreliable.

Putting it to use

Track it by product and blended, and reconcile changes in the blended figure against mix before concluding anything about pricing. A quick check: recalculate last month's blended margin using this month's mix. If that explains the movement, the margin did not change, the catalogue did.

Use per-product gross margin for range decisions and blended gross margin for tracking the health of the whole. Neither is suitable for setting a discount, which needs contribution.

Improving it without raising prices

There are three levers other than price, and they are usually easier to move. Lowering unit cost through better sourcing or larger orders raises margin directly, though larger orders bring carrying costs that have to be netted off. Reducing waste and damage raises the effective margin because fewer units are lost between purchase and sale. And shifting mix towards higher-margin products raises the blended figure with no change to any product at all.

The mix lever is the one most often overlooked and frequently the largest. Promoting the 55% products over the 45% one in the example above: through placement, bundling, or simply which items appear in search and email, moves the blended margin by more than most sourcing negotiations achieve.

It is also reversible and low risk, which makes it a better first move than a price rise on a catalogue whose price sensitivity you have not tested.

Where to go next

The Gross Margin question rarely arrives on its own. These are the ones that usually come with it:

Gross Profit Calculator — Gross profit in money, per sale and per period.
Gross Profit Margin Calculator — Revenue minus cost of goods, as a percentage.
Blended Margin Calculator — Overall margin across a mixed catalogue.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

Is gross margin the same as gross profit?

Loosely used as synonyms, but strictly gross profit is the currency amount and gross margin is that amount as a percentage of revenue. A £30 gross profit on a £50 sale is a 60% gross margin.

How do I calculate gross margin across many products?

Total revenue minus total cost of goods, divided by total revenue. Do not average the individual product margins, that weights a £5 item the same as a £500 one and gives a figure that describes nothing.

Should marketplace fees be in cost of goods?

Strictly they are selling costs rather than cost of goods, so they sit below the gross margin line in formal accounting. Many sellers include them anyway to get a realistic per-sale figure. Either is defensible provided you stay consistent.

What gross margin do I need to be viable?

Enough to cover operating costs at your realistic volume, with room left over. Work backwards: if fixed costs are £5,000 a month and you can sell £20,000, you need a gross margin above 25% before you have earned anything.