How to Use Gross Margin Calculator
Enter the the cost of the Product and the selling price of the product.
How to calculate Gross Margin
Gross Margin Formula
: is equal to profit divided by the selling price
G = Profit/Selling Price.
Mark up Percentage
: Profit divided by the Cost of making the Product
: The difference between the selling price and the cost of the product
P = Selling Price/Cost
- We sell chairs for $250.
- Each chair costs $200.
- Gross Profit: Revenue - cost => $250 - $200 = $50
- To find the margin, divide gross profit by the revenue.
- $50/$250 =0.2 margin
- To get a percentage mulitple by 100 : 0.2 X 100 = 20%
- Margin is 20%, which means we keep 20% of our total revenue. The remaining 80% of revenue is spent on building the chairs.
Gross Margin Definition: Is the difference between revenue and the Cost Of goods sold divided by revenue.
Gross Margin is a type of profit margin, it is used to help with pricing, incremental sales and on to help with promotion decisions.
In sales, you can measure profit by using margin which gives an indication of the gross profit. For example, if your margin is 25%, 25% of your total sales is profit.