Gross Profit Calculator
Calculate gross profit and gross margin from net sales and cost of goods sold, or work out COGS from opening inventory, purchases and closing stock.
Gross profit subtracts cost of goods sold from net sales. It helps compare selling revenue with the cost assigned to goods sold before other operating and financing items. Enter COGS directly or use a simplified inventory roll-forward with opening stock, purchases or production additions, and closing stock.
How to use this tool
- Enter gross sales for the period and any returns, allowances or discounts.
- Enter your cost of goods sold, or choose the inventory method.
- For the inventory method, enter opening inventory, purchases and closing inventory at cost.
- Read gross profit, gross margin and markup, and check the statement below.
Formula
Net sales = Gross sales − Returns, allowances and discounts
COGS = Opening inventory + Purchases − Closing inventory
Gross profit = Net sales − COGS
Gross margin = Gross profit ÷ Net sales × 100
Value inventory at cost, not at retail price. Purchases should include freight-in and import duties, because they are part of what the goods cost to get ready for sale. The inventory method assumes a consistent valuation basis and no omitted adjustments. Net-sales ratios are undefined when returns equal sales; gross profit remains calculable.
Example
A shop records $480,000 of gross sales and $12,000 of returns and discounts, giving $468,000 net sales. It started the year with $60,000 of stock, bought $290,000 more and counted $70,000 at year end, so COGS is $280,000. Gross profit is $188,000, a 40.17% gross margin and a 67.14% markup on cost.
Frequently asked questions
Is gross profit the same as gross margin?
No. Gross profit is a dollar amount; gross margin is that amount as a percentage of net sales. Both come from the same two figures.
What goes into cost of goods sold?
Depending on the accounting framework, inventory cost can include purchases, direct labor and allocated production overhead. Factory rent or depreciation may therefore enter COGS; selling and general administrative expenses are treated separately. Avoid counting costs twice.
Why did my gross margin fall when sales rose?
Usually because costs rose faster than prices, discounts increased, or the mix shifted towards lower-margin products. Compare margin by product to find the cause.
Sources
Last updated: 2026-10-30