How Do You Calculate Margin – Cost Calculator | Online Quote & Profit Estimator

Profit Margin Calculator

Quickly determine your gross profit margin, markup, and total profit based on cost and revenue.

Cost of Goods Sold (COGS) $

Selling Price (Revenue) $

Gross Profit

$0.00

Margin (%)

Markup (%)

How do you calculate margin?

Understanding the difference between profit margin and markup is essential for any business owner or financial analyst. While both metrics relate to profit, they express it relative to different values.

The Gross Profit Margin Formula

Margin is the percentage of the selling price that is profit. The formula for calculating gross margin is:

            Margin = ((Revenue – Cost) / Revenue) * 100
        

The Markup Formula

Markup is the percentage of the cost price that is added to reach the selling price. The formula is:

            Markup = ((Revenue – Cost) / Cost) * 100
        

Calculation Example

Suppose you buy a product for $60 (Cost) and sell it for $100 (Revenue):

Gross Profit: $100 – $60 = $40
Margin: ($40 / $100) * 100 = 40%
Markup: ($40 / $60) * 100 = 66.67%

Why is Margin Important?

Profit margins indicate how much money a company keeps from every dollar of sales. A higher margin suggests a more efficient business model and a greater cushion against price fluctuations or increases in cost of goods sold. Many industries have "standard" margins; for instance, retail clothing often sees higher margins than grocery stores, which rely on high volume with low margins.