Gross Profit Calculator

Gross profit is what is left of your revenue after paying for the goods you sold: revenue − cost of goods sold. On this calculator that figure appears on the Profit line, under a headline percentage (the gross margin) and a markup.

With the defaults, $200 of revenue and $120 of COGS leave $80 of gross profit, a 40.00% margin and a 66.67% markup. If you only need the dollar amount, for a budget, a loan application or a bonus pool, that $80 is the number to take away.

Gross profit is the money available to pay rent, salaries, marketing and everything else, so it is usually worked out for a whole period rather than one item. The two fields below show how to get period totals right.

The revenue field should hold what customers actually kept and paid for. Take sales before deductions, then subtract:

• returns and refunds
• discounts and coupons given at checkout
• allowances, such as a partial refund for a damaged item

Say a shop booked $200,000 of sales in a year, with $6,000 of returns and $4,000 of discounts. Net sales are $190,000, and that is what goes in the revenue field. Entering the $200,000 instead would overstate gross profit by $10,000.

Leave out sales tax or VAT collected, and shipping charges you pass straight through to a carrier at cost, if you also leave the carrier's bill out of COGS. Whatever you decide, treat income and cost the same way.

If you hold stock, your purchases in a period are not the same as the cost of what you sold. The standard way to get COGS for a period is:

COGS = opening inventory + purchases − closing inventory

Continuing the example: the shop started the year with $30,000 of stock at cost, bought $110,000 more and counted $26,000 at the end. COGS is $30,000 + $110,000 − $26,000 = $114,000.

Stock that was lost, stolen or written off also ends up in COGS through this formula, because it is missing from the closing count. That is one reason a stock count can lower gross profit even when sales were strong.

Gross profit only becomes profit you keep after operating expenses. Subtract rent, wages outside production, marketing, software and other overheads to get operating profit.

If the shop above spent $52,000 on operating expenses, its operating profit was $76,000 − $52,000 = $24,000. You can get the same result here by entering $190,000 of revenue and $166,000 ($114,000 + $52,000) as the cost.

Turning that around gives a useful planning figure: to cover $52,000 of overheads at a 40% gross margin, you need $52,000 ÷ 0.40 = $130,000 of net sales before you make any operating profit at all.