Gross profit definition

Gross profit, expressed as a dollar amount, is the amount of profit generated from the sale of an item, or for a period of business activity, like a month, and is calculated before operating expenses. Both are calculated as you see below.

Gross profit for an item is calculated by subtracting the cost of the item sold from the sale price of the item.

Gross profit for a period of business activity is calculated by subtracting the cost of goods sold (COGS) for a period of activity from total sales for that period. Operating expenses are not included in this equation, however, freight and some labor may be part of the COSG.

Using the unit example, if a product costs $5 and you sell it for $9, your gross profit is $4.

Search again for calculating gross profit margin. Also search for mark-up.