Margin calculator

Frequently asked questions

What costs should I include in cost of goods?

Cost of goods sold should include only direct costs that vary with the product — materials, manufacturing, and direct labor are typical examples. Overhead, rent, salaries for non-production staff, and financing costs are not included in gross margin calculations.

What is the difference between gross margin and net margin?

Gross margin subtracts only cost of goods sold from revenue, while net margin also deducts operating expenses, interest, and taxes. A high gross margin can still produce a low or negative net margin if overhead or other costs are large.

Why does this calculator also show a markup equivalent?

Markup and margin describe the same profit spread from different reference points — markup divides profit by cost, while margin divides profit by revenue. Showing both makes it easier to translate between cost-based pricing rules and revenue-based targets without recalculating by hand.

What gross margin is considered healthy?

Healthy gross margin varies significantly by industry. Software and services businesses often carry margins well above 50 percent, while physical-goods retailers may operate closer to 20 to 30 percent. Comparing against industry benchmarks is more meaningful than a single universal threshold.