Business
Gross Profit Calculator
Works gross profit, where what counts as cost of goods sold decides it.
Result
Gross profit is before overhead, admin, marketing and owner's pay. It is the money available to cover those, not what you keep.
Get a Free Business AuditHow the calculation works
Revenue less cost of goods sold, in dollars and as a percentage. The classification question is the whole substance: direct materials and direct labour generally belong in cost of goods sold while supervisory and administrative costs belong in overhead, and moving items between the two changes the figure without changing the business.
What moves the number
- What is classified as direct cost.
- Whether direct labour is included.
- Freight, waste and shrinkage.
- Revenue mix across lines with different costs.
Where this one goes wrong
A business that changes its classification between periods has made its own trend meaningless, and a business comparing against a benchmark without knowing the benchmark's definition is comparing nothing. Fix a definition and document it. Freight and waste are the items most often left out of direct cost, and both are genuinely variable with volume, which means excluding them overstates gross profit systematically.
Before you quote
- Document the cost of goods sold definition and keep it.
- Include freight, waste and shrinkage in direct cost.
- Measure gross profit by line as well as in total.
Questions
About this calculator
What belongs in cost of goods sold?
Direct materials and direct labour, plus freight, waste and shrinkage, which are all genuinely variable with volume. Supervisory and administrative costs belong in overhead, and the boundary matters more than where exactly it is drawn.
Why does my gross profit trend look odd?
Check whether the classification changed. Moving a cost between direct and overhead changes gross profit without changing the business, and a business that has done so inadvertently has made its own trend meaningless.
Should gross profit be measured by line?
Yes, because the total averages lines that may perform very differently. The line-level figures are what reveal which products or services are subsidising others, and that is usually where the useful findings are.
The formula
gross profit = revenue − cost of goods sold
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How to use this calculator
- Revenue ($). Enter your own figure; the page starts at $480,000.
- Materials and parts ($). Enter your own figure; the page starts at $168,000.
- Direct labour ($). Enter your own figure; the page starts at $132,000.
- Other direct costs ($). Subcontractors, equipment hire, disposal.
The result updates as you type, so you can try a figure, see what it does to gross profit, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Revenue | $480,000 |
| Materials and parts | $168,000 |
| Direct labour | $132,000 |
| Other direct costs | $24,000 |
What comes out
| Result | Value |
|---|---|
| Gross profit main result | $156,000 |
| Gross margin | 32.50% |
| Total cost of goods sold | $324,000 |
| Gross profit per revenue dollar | $0.33 |
Gross profit is $156,000 on 480,000 of revenue: a 32.50% gross margin. Every revenue dollar leaves $0.33 to cover overhead and profit.
How sensitive the answer is
Holding everything else steady and changing only revenue, this is what happens to gross profit. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Revenue ($) | Gross profit |
|---|---|
| $240,000 | -$84,000 |
| $360,000 | $36,000 |
| $480,000 example above | $156,000 |
| $720,000 | $396,000 |
| $960,000 | $636,000 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Revenue ($)
- A money amount, starting at $480,000.
- Materials and parts ($)
- A money amount, starting at $168,000.
- Direct labour ($)
- A money amount, starting at $132,000.
- Other direct costs ($)
- Subcontractors, equipment hire, disposal.
What the results tell you
| Result | What it is |
|---|---|
| Gross profit | The headline result. A money figure. |
| Gross margin | A percentage. |
| Total cost of goods sold | A money figure. |
| Gross profit per revenue dollar | A number. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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Works contribution margin, which is the figure for every keep-or-drop decision.
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