A price margin calculator is a tool used to
determine the selling price of a product or service, given its cost and the desired profit margin.
Calculating the price margin typically involves adding a certain percentage of profit to the cost of the
The Revenue, Cost, or Margin can be accurately determined by selecting and locking the desired variable
in the calculation feature.
The formula for
calculating the price margin
- REV Revenue. This is the price at which you need to sell the
product to achieve the desired profit margin.
- C – Cost of the Product. This is the amount it costs to produce
or purchase the product.
- M – Desired Profit Margin. In this formula, M is expressed as a
percentage. and transformed to decimal by dividing to 100.
For example, if the cost of a product is $50 and you want a profit margin of 20%, the
selling price would be calculated as follows:
So, you would need to sell the product for $62.5 to achieve a 20% profit margin.
Margin vs. markup
Markup and margin are both commonly used terms in finance and business, particularly in pricing
strategies, but they refer to different concepts. Understanding the difference between them is
important for setting prices effectively and managing profitability.
Markup, calculated from the cost price, is the percentage
increase applied to the cost to establish the selling price. It's essential for covering costs and
securing profit. In contrast, Margin, derived from the
selling price, represents the profit percentage made from each sale, highlighting profitability.
Essentially, markup guides price setting, while margin reveals earnings. Despite similar roles in
pricing, their basis—cost for markup, selling price for margin—and resultant percentages differ,
making them distinct yet interconnected financial tools.