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Gross profit and margin calculator
Gross profit is price minus cost, and gross margin is that profit divided by the price. An item that costs $65 and sells for $100 makes $35 of gross profit, a 35% margin. Enter any two of cost, price and margin to get the rest, the matching markup, and the totals for a quantity. Add inbound freight per unit to work on landed cost, and pick your currency, Canadian dollars included.
Updated October 12, 2026
The formulas
| You want | Formula |
|---|---|
| Gross profit | Price - cost |
| Gross margin | (Price - cost) / price |
| Markup | (Price - cost) / cost |
| Price for a target margin | Cost / (1 - margin) |
| Most you can pay for a target margin | Price x (1 - margin) |
| Landed cost | Unit cost + inbound freight per unit |
Margin is profit as a share of the selling price; markup is profit as a share of cost. The University of Maine Extension calls them markup on price and markup on cost.
Two worked examples from extension bulletins. University of Maine: an item bought for $1.00 and sold for $1.50 has a 50% markup and a 33.3% margin; the 50 cents of profit is the same either way. Mississippi State: to make a 40% gross margin on a product that costs $2.25, the price is $2.25 / (1 - 0.40) = $3.75.
Margin and markup are not the same number
The most common pricing mistake is adding a margin percentage to cost. A 40% markup on a $1.00 item gives $1.40, which is only a 28.6% margin. To earn 40% margin you need $1.67 (the bulletin rounds down to $1.66). The table converts one to the other.
| Gross margin | Equals markup of | Price for $1 of cost |
|---|---|---|
| 10% | 11.1% | $1.1111 |
| 15% | 17.6% | $1.1765 |
| 20% | 25% | $1.25 |
| 25% | 33.3% | $1.3333 |
| 30% | 42.9% | $1.4286 |
| 33.33% | 50% | $1.50 |
| 35% | 53.8% | $1.5385 |
| 40% | 66.7% | $1.6667 |
| 45% | 81.8% | $1.8182 |
| 50% | 100% | $2.00 |
| 60% | 150% | $2.50 |
Markup = margin / (1 - margin).
What a discount really costs
A price cut comes straight out of gross profit. At a 30% margin, 10% off leaves 20 cents of profit on each dollar of the old price instead of 30, so you need half again as many sales to make the same gross profit dollars. The table shows how much more volume each discount needs.
| Discount | At 20% margin | At 30% margin | At 40% margin | At 50% margin |
|---|---|---|---|---|
| 5% off | +33% | +20% | +14% | +11% |
| 10% off | +100% | +50% | +33% | +25% |
| 15% off | +300% | +100% | +60% | +43% |
| 20% off | No volume is enough | +200% | +100% | +67% |
Extra units needed to keep the same gross profit dollars: margin / (margin - discount) - 1.
Gross margin across a whole order
When an order has several lines, add up the dollars first: total gross profit divided by total revenue. Averaging the line percentages overweights the small lines. The quote template shows the blended margin of a quote as you price it.
Gross profit is not net profit
Gross profit pays for everything else: sales and warehouse staff, rent, freight you do not bill, and finally net profit. The University of Maine bulletin’s example builds a 40% margin from 30% for selling and operating costs plus 10% net profit. If your operating costs run 30% of sales, any order below a 30% gross margin loses money even though it shows a gross profit.
WHERE MORSA FITS
Quotes are only worth the ones that turn into orders.
Morsa writes quotes from your price book and your target margins, sends them, and follows up until the customer orders or says no. It works in email, Teams, WhatsApp or whatever you already run on, and it reads prices and stock from your ERP.
