How do I calculate gross profit margin?
We are often asked how to calculate gross profit margin (gross profit expressed as a percentage). Here is the formula:
Gross Margin = (Income – Cost of Goods Sold) / Income x 100
Here is the gross profit margin calculation expressed in absolute terms:
Gross Margin = Income – Cost of Goods Sold + Income x 100
Gross Profit Margin Calculation Example:
A motor sells costs you $35.00 and you sell it for $125.00. Your gross profit margin (gross margin) is
Step One: $125.00 – $35.00 = $90.00.
Step Two: $90.00 divided by $125.00 = .72
Step Three: .72 x 100 = 72
Gross Profit Calculation Notes
- Gross Profit Margin is the same thing as Gross Profit; just expressed as a percentage.
- In our example, Income is the same things as the price you are selling the item for.
- Cost of Goods Sold is the price you paid for the item.
- Please also check out this free price calculator: Labor and Parts Break-Even Price Calculator
- See these related articles: How to Calculate Selling Price (retail price) and Margin versus Markup