Margin Calculator

Understand Your Business Profitability

This calculator is essential for businesses to understand their profitability on a per-item or overall basis. By inputting the cost of goods sold and the revenue generated, it calculates the gross profit, the gross profit margin, and the markup percentage.

The Formulas Explained

• Gross Profit: Gross Profit = Revenue - Cost
  • This is the total profit before accounting for overhead expenses.
• Gross Margin: Gross Margin % = (Gross Profit / Revenue) * 100
  • This shows what percentage of your revenue is profit.
• Markup: Markup % = (Gross Profit / Cost) * 100
  • This shows how much you've increased the price relative to the cost.

How to Use the Calculator

1. Cost: Enter the total cost to acquire or produce the item(s).
2. Revenue: Enter the total selling price of the item(s).
3. Calculate: The tool will display the Gross Margin and Markup percentages.

Real-World Example

A store buys a product for $60 (Cost) and sells it for $100 (Revenue).

• Gross Profit: $100 - $60 = $40
• Gross Margin: ($40 / $100) * 100 = 40%
  • Interpretation: 40% of the selling price is profit.
• Markup: ($40 / $60) * 100 ≈ 66.7%
  • Interpretation: The price was marked up by 66.7% from its cost.

Frequently Asked Questions (FAQ)

• What's the difference between margin and markup? They are two different ways of looking at profit. Margin is profit relative to revenue. Markup is profit relative to cost. The margin percentage will always be lower than the markup percentage.
• Does this include overhead costs like rent or salaries? No, this calculates gross margin. Net margin would subtract all other business expenses (overhead, taxes, etc.) from the gross profit. This calculator focuses on the direct profitability of the goods sold.
• Why is margin important? It's a key indicator of a company's financial health and pricing strategy efficiency. A healthy margin means the business has enough money left over after selling its product to pay for its other expenses.