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Finance & Business · pattern A, Numeric fields

Gross margin from price and cost.

Enter selling price and cost for the gross margin percentage, the profit per unit and the markup it corresponds to.

Inputs

The formula used

margin = (price − cost) ÷ price × 100

Margin is always a share of revenue, never of cost. Gross margin excludes fixed overheads, which is why it exceeds net margin.

Gross margin

33.333 %

Profit per unit
20.00
Equivalent markup
50.000 %
Total revenue
30,000.00
Total gross profit
10,000.00
Price for a 50% margin
80.00
Units needed for £10,000 gross profit
500

Gross margin is not profit.

Gross margin covers only the direct cost of the goods. Rent, salaries, marketing and finance costs come out of it, which is why a business with a healthy 40% gross margin can be losing money at the net level. Comparisons across industries are only meaningful at the same level: gross with gross, net with net.

Questions about margin

What is a good gross margin?
Entirely industry-dependent — a few per cent in grocery distribution, seventy or more in software. Compare against sector peers, not across sectors.
What is the difference from net margin?
Net margin subtracts all operating expenses, interest and tax. Gross margin subtracts only the direct cost of goods sold.
Can margin be negative?
Yes, when the selling price is below cost — deliberate in loss-leader pricing and a serious problem otherwise.

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