[mediaman]

Gross margin is the dollar profit divided by sell price. So, (sale price - purchase price)/(sale price).

You may be thinking of markup, which is the profit dollars as percentage of cost, and is often used in retail.

A 100% markup results in a 50% gross margin.

[hessenwolf]

Dollar profit is a bit misleading. Gross margin is the formula you give, but not taking into account operating costs.