How to Calculate GP (Gross Profit)
'GP' just means gross profit — the money left after the direct cost of what you sold. It takes one subtraction to get the amount and one division to get the percentage. Here is exactly how.
What Does GP Mean?
GP is shorthand for gross profit. It is the profit on a sale after subtracting only the direct cost of the goods — not rent, wages, marketing or tax. Those come later, in net profit. GP answers one focused question: does this product or sale make money before overheads?
The GP Formula
There are two numbers people mean by "GP": the dollar amount and the percentage. Both come from the same starting point.
GP % = (GP ÷ Selling Price) × 100
Step-by-Step
- Take the selling price — what the customer paid.
- Subtract the cost — what the item cost you to buy or make (COGS only).
- That difference is your GP in dollars.
- Divide GP by the selling price, ×100 — that is GP %.
Worked Example
You buy a product for $60 and sell it for $100:
GP % = ($40 ÷ $100) × 100 = 40%
So your GP is $40 per unit, or 40%. If you sold 50 of them, total GP is 50 × $40 = $2,000 before any overheads.
| Selling Price | Cost | GP ($) | GP % |
|---|---|---|---|
| $100 | $60 | $40 | 40.0% |
| $100 | $80 | $20 | 20.0% |
| $250 | $175 | $75 | 30.0% |
| $40 | $22 | $18 | 45.0% |
The most common GP mistake: dividing by cost instead of selling price. That gives you markup, not GP. $40 ÷ $60 = 66.7% is the markup; $40 ÷ $100 = 40% is the GP. See the full explanation in margin vs markup.
GP Amount vs GP Percentage — Which to Use
- GP amount ($) tells you the actual cash a sale contributes. Useful for totals and budgeting.
- GP % lets you compare products of different prices on a level field, and is what appears on profit & loss statements.
Most businesses track both: the percentage to spot pricing problems, the amount to see real cash contribution.
GP vs Net Profit
GP stops at direct costs. After GP you still subtract operating expenses, interest and tax to reach net profit. A healthy GP is necessary but not sufficient — if overheads exceed gross profit, the business still loses money. For the deeper calculation see how to calculate gross profit margin.
Calculate GP instantly
Enter buying and selling price and get GP, GP % and markup in real time.
Open the GP CalculatorFrequently Asked Questions
What does GP mean?
+GP stands for gross profit — the money left from a sale after subtracting only the direct cost of goods sold, before operating expenses, interest and tax.
How do you calculate GP?
+Subtract cost from selling price to get GP in dollars. For GP percentage, divide GP by the selling price and multiply by 100. Example: ($100 − $60) ÷ $100 × 100 = 40%.
What is the GP formula?
+GP = Selling Price − Cost. GP % = (GP ÷ Selling Price) × 100. Cost here means cost of goods sold (COGS) only.
Is GP calculated on cost or selling price?
+GP percentage is calculated on the selling price. Dividing profit by cost instead gives markup, which is a different and larger number.
What is the difference between GP and net profit?
+GP only subtracts direct cost of goods. Net profit goes further and subtracts all operating expenses, interest and tax, so net profit is always lower than GP.
This guide is general business education, not financial or accounting advice. Margin norms vary by industry, region and business model — always validate against your own figures and a qualified advisor where needed.