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How to calculate Gross margin

The Gross margin formula, with plain worked examples you can check yourself.

Gross margin = (R − COGS) ÷ R × 100

The result is a percentage (%).

Worked examples

R = 500 · COGS = 400Gross margin = 20%
R = 700 · COGS = 280Gross margin = 60%
R = 500 · COGS = 300Gross margin = 40%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Multiply by 100 to show the answer as a percentage.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Profit & Margins.

Related terms

Gross marginRevenueNet incomeEBITDAOperating profit

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