Margin Calculator

Margin Calculator: Complete Guide

What is it?

A Margin Calculator helps businesses determine profit margins by calculating the difference between selling price and cost price, accounting for discounts, taxes, and quantity. It shows both dollar amounts and percentages for better financial decisions.

Key Formulas

1. Gross Revenue:
   Selling Price × Quantity × (1 - Discount%)
2. Total Cost:
   Cost Price × Quantity
3. Profit Margin:
   (Net Profit / Gross Revenue) × 100
4. Markup Percentage:
   ((Selling Price - Cost Price) / Cost Price) × 100

Formulas derived from standard accounting principles and financial mathematics

How to Use

1. Enter your item’s cost price (what you paid)
2. Input your selling price (what customers pay)
3. Set quantity (number of units sold)
4. Add any discount percentage (if applicable)
5. Include local tax rate percentage
6. See instant profit calculations and visual breakdown

Common Terms Explained

• Gross Revenue: Total sales before expenses
• Net Profit: Final profit after ALL costs
• Markup: Price increase % over cost
• Margin: Profit % of final sale price

FAQs

Q: Why does my margin decrease with discounts?
A: Discounts reduce your selling price, shrinking the profit per item.

Q: Should I use markup or margin?
A: Markup helps price products, margin shows true profitability.

Q: How does quantity affect profit?
A: Higher quantities spread fixed costs but may require bulk discounts.

Pro Tips

• Always compare margin (not just dollar profit) across products
• Recalculate after supplier price changes
• Tax rates vary by location - check local regulations
• Higher volume ≠ better profits if margins drop too much

Technical Notes

• Calculations follow GAAP (Generally Accepted Accounting Principles)
• Rounding to 2 decimal places for currency
• All percentages converted to decimals in formulas
• Negative margins highlight unprofitable items