Profit Margin Calculator
Enter revenue and direct cost to calculate gross profit, gross margin, and the share of revenue consumed by cost.
Formula: Gross profit = revenue - direct cost. Gross margin = gross profit / revenue x 100.
Free · private in your browser · no signup
Enter the numbers
Calculated result
Gross profit
$1,000.00
$2,500.00 revenue minus $1,500.00 direct cost
Gross margin
40.00%
Gross profit as a percentage of revenue
Cost ratio
60.00%
Direct cost as a percentage of revenue
Formula: Gross profit = revenue - direct cost. Gross margin = gross profit / revenue x 100.
Use the result correctly
What the calculation means
This is a gross-margin calculation, not net profit. It does not subtract overhead, payroll not included in direct cost, financing, taxes, owner compensation, or other operating expenses.
Useful for
- Check a project or product gross margin
- Compare quoted revenue with expected direct cost
- Decide whether a discount leaves enough gross profit
Worked examples
Margin calculation examples
Use these examples to check the formula, then replace the figures with the real values for your transaction.
| Scenario | Input | Calculated result |
|---|---|---|
| Scenario Service project | Input $2,500 revenue · $1,500 direct cost | Calculated result $1,000 profit · 40% margin |
| Scenario Product sale | Input $120 revenue · $72 direct cost | Calculated result $48 profit · 40% margin |
| Scenario Break-even sale | Input $500 revenue · $500 direct cost | Calculated result $0 profit · 0% margin |
Frequently asked questions
Is gross margin the same as net profit margin?
No. Gross margin subtracts direct cost. Net margin also accounts for operating expenses, financing, taxes, and other costs.
Can profit be negative?
Yes. If direct cost exceeds revenue, gross profit and gross margin are negative.
Should labor be included in direct cost?
Include labor that is directly attributable to the job or product when that matches how you measure gross margin.
More free calculators
Check the next number before it reaches the customer.