Direct Answer: To calculate gross profit margin, subtract the cost of goods sold from total revenue, divide by revenue, and multiply by 100. Margin represents the percentage of each sales dollar retained as gross profit.
Quickly find your profit percentage and markup to ensure your business remains profitable.
Margin = ((Revenue - Cost) / Revenue) * 100| Variable | Description & Context | Measurement Unit | Sample Input |
|---|---|---|---|
Cost |
Cost ($) | $ | 10.00 |
Revenue |
Revenue ($) | $ | 25.00 |
Understanding these foundational concepts ensures you interpret your results with precision:
A healthy profit margin varies by industry, but understanding the difference between margin and markup is step one for any entrepreneur.
If an item costs $50 and you sell it for $100, your margin is 50%.
| Computation Step | Formula / Input Parameter | Calculated Output |
|---|---|---|
| 1. Applied Formula | Margin = ((Revenue - Cost) / Revenue) * 100 |
Mathematical Standard |
| 2. Applied Scenario | If an item costs $50 and you sell it for $100, your margin is 50%. | Standard Calculation Run |
| 3. Final Result | Verified Calculation Output | Computed Output |
Don’t lose money by confusing these two numbers. Learn the essential formula for every small business owner.
Read the Full Guide: Margin vs. Markup: The 1-Minute Guide to Pricing Your Products →