What this calculator measures
Gross profit measures the profit remaining after subtracting the cost of goods sold from total revenue.
Common use cases
Use this model when the inputs describe the same decision, period and customer or product scope.
- Calculate gross profit and gross margin from net revenue and cost of goods sold.
- Use the result with the recorded inputs: Net revenue, Cost of goods sold.
- Compare multiple scenarios before making a business decision.
Formula
Gross profit = Net revenue − COGS
Gross profit is the amount available to cover operating expenses after direct cost.
Worked example
With $100,000 revenue and $60,000 COGS, gross profit is $40,000 (40% margin).
How to interpret the result
Higher margins provide more buffer for operating expenses.
Assumptions and limitations
- All direct production costs are accounted for in COGS.