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Profit Margin Calculator

See how much profit you keep from each sale, as dollars and as a margin percent. Or find the price to charge to hit the margin you want.

Level: Grade 7

  • Common Core standard 7.RP.A.3Use proportional relationships to solve multistep ratio and percent problems. Examples: simple interest, tax, markups and markdowns, gratuities and commissions, fees, percent increase and decrease, percent error.
Printable worksheet

Profit Margin Calculator

Know the answer you need? Pick an input to work backward.

Inputs
Calculation

What the item or sale cost you.

Result

Gross margin

40%

Selling for $100.00 against a cost of $60.00 leaves $40.00 of gross profit, a 40% margin.

Gross profit
$40.00
Equivalent markup
66.67%

See the step-by-step solution ↓

Step-by-step solution

  1. Take the cost away from the selling price to get the gross profit

    $100.00−$60.00=$40.00

  2. Divide the profit by the selling price, then multiply by 100, to see what share of each sale you keep

    $40.00$100.00×100=40%

  3. For comparison, find the markup: the same profit as a share of the cost

    $40.00$60.00×100=66.6667%

Test yourself

20 quick questions built from this calculator's formula: work out results, predict what happens when an input changes, and work backward from an answer. Every answer comes with the working.

Please note: Results are estimates for planning and comparison. Lenders, banks, and tax authorities may round differently or include fees not modeled here, so confirm figures with your provider before deciding.

What this calculator does

See how much of each sale you actually keep. Gross margin is the share of every sales dollar left after paying for what you sold. A 40% margin means 40 cents of each dollar of revenue (sales income) is gross profit. That money covers rent, wages, advertising and everything else. Whatever is left after all that is net profit.

You can use the calculator two ways. Enter a cost and a selling price to see the gross profit and margin percent. Or enter a cost and the margin you want, to see the price you need to charge. Either way, it also shows the matching markup, because the two numbers are easy to mix up.

Where it's used

Why this math matters outside the classroom:

  • Gross margin. Selling for $50 an item that cost $30 leaves a 40% gross margin.
  • Pricing for a margin. A seller who wants a 40% margin on a $30 cost divides 30 by 0.6 to get a $50 price.
  • Margin versus markup. The same $20 profit is a 40% margin on price but a 66.7% markup on cost.
  • Comparing products. Shop owners rank products by margin to see which ones contribute the most profit per sale.

Grade level and standards: Grade 7; Common Core State Standards for Mathematics 7.RP.A.3. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.

How to use it

  1. Choose whether you want the margin from a price you know, or the price you need for a target margin.
  2. Enter the cost of the item or job: what you paid to buy, make or deliver it.
  3. Enter the selling price (revenue), or the target margin as a percent below 100.
  4. Read the margin or the price you need, the gross profit, and the matching markup on cost.

What the inputs mean

Cost
What it directly cost you to provide what you sold, such as the wholesale price, materials and hands-on labor. Overheads, the general costs of running the business like rent, are usually left out of gross margin.
Revenue (selling price)
The amount the customer pays, before any sales tax. You can enter one item or a whole period's totals; the percent comes out the same either way.
Target margin
The share of the selling price you want to keep as gross profit. It must be below 100%, because a 100% margin would mean the item cost nothing.

Formula and method

gross profit = revenue − cost
margin % = (revenue − cost) ÷ revenue × 100
price for a target margin = cost ÷ (1 − margin ÷ 100)
markup % = (revenue − cost) ÷ cost × 100

In the formulas, revenue is the selling price and cost is what the item cost you. Margin and markup use the same profit, but divide it by different things. Margin divides by the selling price, so it can never reach 100%. Markup divides by the cost, so it can be any size. A 100% markup doubles the cost, but that's only a 50% margin.

To find a price from a target margin, remember the cost must make up the rest of the price: (100 − margin)%. Divide the cost by that share, and you get the price. A common mistake is adding the margin percent to the cost (60 × 1.25). That's a markup, not a margin, and it leaves you short of your target. It's an easy slip, and the calculator helps you avoid it.

Worked example

A shop buys a lamp for $60 and sells it for $100. Later it wants a 25% margin on the same $60 cost.

  1. Gross profit: $100 − $60 = $40.
  2. Margin: $40 ÷ $100 × 100 = 40%. The equivalent markup is $40 ÷ $60 × 100 = 66.67%.
  3. For a 25% margin: $60 ÷ (1 − 0.25) = $60 ÷ 0.75 = $80.
  4. Check: $80 − $60 = $20 of profit, and $20 ÷ $80 = 25%.

Result: At $100, the lamp earns a 40% margin. To earn exactly 25%, it would sell for $80, which is a 33.33% markup on cost.

Understanding the result

What counts as a healthy margin depends entirely on the business. Grocery stores often run thin margins but sell a lot. Software and services can run much higher ones. Compare your margin with your own past results and your overhead, not with an outside rule of thumb.

A negative margin means you sold below cost. The calculator shows it as a gross loss, so you can see how far the price would need to move.

Because margin is a percent of the price, discounts hit it hard. Cutting the $100 lamp to $80 halves the profit from $40 to $20, even though the price fell by only 20%.

Assumptions and limitations

  • Cost is the direct cost of the goods or services sold. The result is a gross margin, not a net margin after overheads, interest and taxes.
  • Revenue doesn't include sales tax you collect for the government.
  • Nothing is rounded during the math. Money is shown to the cent, and percents to two decimal places.
  • For net profit margin, put your total costs, including overheads, in the cost field. The formula is the same, but the meaning changes.
  • Bulk discounts, returns, card processing fees and shipping aren't counted unless you include them in cost or revenue.
  • The price it gives is a math answer. It can't tell you whether customers will pay it.

Frequently asked questions

What is the difference between margin and markup?

Both start from the same profit. Margin is profit divided by the selling price. Markup is profit divided by the cost. A $60 item sold for $100 has a 40% margin and a 66.67% markup. When there's a profit, margin is always the smaller of the two.

Why can't the margin be 100% or more?

Margin is the share of the price you keep. Keeping 100% of the price would mean the item cost nothing, and you can't keep more than the whole price. Markup has no such limit, because it's measured against cost.

Why doesn't adding 25% to my cost give a 25% margin?

Adding 25% to cost is a 25% markup. On a $60 cost, that gives $75, and $15 ÷ $75 is only a 20% margin. To reach a 25% margin, divide the cost by 0.75 instead, which gives $80.

Is this gross margin or net margin?

It's whichever matches the cost you enter. With only the direct cost of the goods, it's gross margin. If you enter all costs, including rent, wages and other overheads, the same formula gives net margin.

Can I use totals instead of a single item?

Yes. Enter a month's total revenue and total cost of goods sold to get the overall gross margin for that month. The percent works the same way at any size.

How this calculator is checked

Method: Standard definitions: gross margin = (revenue − cost) ÷ revenue; price = cost ÷ (1 − margin), derived by solving the margin formula for revenue. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.

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