Gross Profit Calculator

Gross profit only subtracts the direct cost of producing what you sold (COGS) from revenue -- materials, production labor, and similar direct costs. Net profit goes further and subtracts every other operating expense too: rent, marketing, salaries not tied to production, interest, and taxes. A company can have strong gross profit and still post a net loss if those additional costs are high enough, so the two figures answer different questions.

The dollar figure tells you how much money is left after covering production costs, but it does not tell you how efficiently you're converting sales into that profit. Margin restates the same number as a percentage of revenue, so a $1 million gross profit on $2 million in sales (50% margin) is a very different business than $1 million in gross profit on $10 million in sales (10% margin), even though the dollar figure is identical.

Because gross profit is Revenue minus COGS, every additional dollar of COGS reduces gross profit by exactly one dollar, with no multiplier effect. At this calculator's default figures -- $100,000 revenue and $60,000 COGS -- raising COGS by 10% (to $66,000) trims gross profit from $40,000 to $34,000, a $6,000 reduction, while the same 10% swing in revenue moves gross profit by a larger $10,000, since revenue drives the top of the subtraction rather than the part being subtracted.

No, not with a positive COGS. Margin is (Revenue - COGS) / Revenue, and as long as COGS is zero or positive, the numerator can never exceed the denominator, capping margin at 100% (which only happens if COGS is exactly zero). A negative COGS is not a realistic business scenario, so in practice margin stays below 100% and moves toward 0% or negative as COGS approaches or exceeds revenue.