Question 1

What is Gross Margin and how is it different from Markup?

Accepted Answer

Gross Margin is calculated as (Revenue - COGS) / Revenue, expressing profit as a percentage of revenue. Markup is (Price - Cost) / Cost, expressing profit as a percentage of cost. They measure profitability from different perspectives.

Question 2

Can Gross Margin be negative?

Accepted Answer

Yes, when COGS exceeds Revenue, you have a negative gross margin. This means you're selling at a loss before accounting for any other expenses.

Question 3

How do I price to hit a target margin from my cost?

Accepted Answer

Use the formula: Required Price = Cost / (1 - Target GM% / 100). For example, if your cost is $70 and you want 30% GM, price = 70 / (1 - 0.30) = $100.

Question 4

What is breakeven revenue and how is it calculated?

Accepted Answer

Breakeven revenue is the amount of sales needed to cover your fixed costs. Formula: Fixed Costs / (GM% / 100). This tells you the minimum revenue needed to avoid losses.

Question 5

Does this calculator include fixed costs or taxes?

Accepted Answer

You can optionally include fixed costs to calculate approximate operating income and breakeven revenue. Taxes are not included in this calculator as they vary by jurisdiction.

Gross Margin Income Calculator

Results

Frequently Asked Questions