Margin Percentage Calculation

Margin Percentage Definition

Gross margin defined is Gross Profit/Sales Price. All items needed to calculate the gross margin percentage can be found on the income statement. The margin percentage often refers to sales or profitability which may help lead to several key understandings about the company’s business model as well as how successful the company is at maintaining its cost structure to gain the proper amount of sales. Analysis of margins within a business is often useful in controlling the price in which you need to sale as well as a control on the cost associated to make the sale. Look at the following margin percentage calculation process.

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How to Calculate Margin Percentage

In this example, the gross margin is $25. This results in a 20% gross margin percentage:

Gross Margin Percentage = (Gross Profit/Sales Price) X 100 = ($25/$125) X 100 = 20%

Not quite the “margin percentage” we were looking for. So, how do we determine the selling price given a desired gross margin? It’s all in the inverse…of the gross margin formula, that is. By simply dividing the cost of the product or service by the inverse of the gross margin equation, you will arrive at the selling price needed to achieve the desired gross margin percentage.

For example, if a 25% gross margin percentage is desired, then the selling price would be $133.33 and the markup rate would be 33.3%:

Sales Price = Unit Cost/(1 – Gross Margin Percentage) = $100/(1 – .25) = $133.33

Markup Percentage = (Sales Price – Unit Cost)/Unit Cost = ($133.33 – $100)/$100 = 33.3%

Margin Percentage Calculation Example

Look at the following margin percentage calculation example. Glen charges a 20% markup on all projects for his computer and software company which specializes in office setup. Glen has just taken a job with a company that wants to set up a large office space. The total cost needed to set up the space with computer and the respective software is $17,000. With a markup of 20% the selling price will be $20,400(see markup calculation for details). The margin percentage can be calculated as follows:

Margin Percentage = (20,400 – 17,000)/20,400 = 16.67%

Using what you’ve learned from how to calculate your margin percentage, the next step is to download the free Pricing for Profit Inspection Guide. Easily discover if your company has a pricing problem and fix it.

margin percentage calculation, Calculate Margin Percentage

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margin percentage calculation, Calculate Margin Percentage

See Also:
Margin vs Markup
Markup Percentage Calculation
Retail Markup
Gross Profit Margin Ratio Analysis
Net Profit Margin Analysis

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42 Responses to Margin Percentage Calculation

  1. stup March 17, 2016 at 5:09 am #

    I have been given this calculation at work: (to get 15% of GP) I have to divide the cost price by 0.85. So, if I am needing to get 20% of GP, what would I divide the cost price by?

    • Dave Lin March 24, 2016 at 1:21 pm #

      You would divide by 0.80 (1-.20 = .80)

    • Ben December 27, 2016 at 5:06 pm #

      I have a question. If 1 unit cost me $12 and I was to retail it for $25 what is the markup percentage?

      • Daniel June 4, 2017 at 4:18 am #

        For markup you always check how profit relates to cost. So you simply divide your profit by your cost. (25-12)/ 12 = 108.33%

      • Kevin June 6, 2017 at 10:42 am #

        @ Daniel, your calc. is incorrect because you divided by the cost (12) not the gross profit (13). You have to divide profit (13) by the selling price (25) to get your margin. Therefore, 13/25 = 52% margin (not 108%)

      • Kevin June 6, 2017 at 10:45 am #

        Ben, the correct calculation is:
        Price = 25
        Cost = 12
        Profit = 25-12=13

        to get margin you divide PROFIT into Selling Price and multiply by 100.
        = 13/25 =.52 x 100 = 52%

        • Steven October 4, 2017 at 2:06 pm #

          @Kevin you are correct that 52% is the Margin but (1) Ben was asking for the Mark-Up % and (2) Daniel provided him with correct calculation. Mark-up being 108%.

        • Keyur Amin July 19, 2018 at 7:58 am #

          Superb Formula. Thankx. Very much useful.

  2. Nihaal May 1, 2016 at 10:45 am #

    I want a 100% margin. How do I ascertain the Selling Price if so?

    • Justin May 24, 2016 at 9:30 pm #

      to achieve a 100% margin, your cost would have to be zero.
      IE; 100% of the sell price is profit.

    • Sam August 30, 2016 at 6:48 pm #

      You want 100% markup I think, not 100% margin

  3. Smriti May 13, 2016 at 12:49 pm #

    what about the taxes I incur on my selling price? Like say VAT. Where are these accounted?

  4. goutam May 16, 2016 at 11:57 pm #

    I am here

  5. Suba July 22, 2016 at 4:56 am #

    how to calculate this margin

    Rp 205

    Cost 124

    30% Discount And 25-4 free

  6. keisha September 9, 2016 at 1:21 pm #

    How I could calculate de M%, what is the formula that I can use for this… M% is Margin percent or Markup percent… Iam so confuse!

    • Ben October 8, 2016 at 5:39 pm #

      Try using the margin calculator we built, hope it helps!

  7. keisha September 9, 2016 at 1:44 pm #

    I have to get this example right… they give me only that information:
    Unit price 1.99
    Box cost 17.55
    Box Q. 12
    Margin=? I can’t Find it
    M%=? I can’t find it

    • Keith September 21, 2016 at 2:47 pm #

      Box Selling price = 1.99 x 12 = 23.88
      Box Cost price = 17.55
      Margin = 6.33 (23.88 – 17.55)
      Margin % =26.5% (6.33/23.88)

  8. Tina September 23, 2016 at 9:09 pm #

    How to calculate sales business acumen sales how to get the percent the gross margin dollar that would equal to cents

  9. Cody October 18, 2016 at 1:06 am #

    What is a 200% markup of $25

    • David September 29, 2017 at 2:22 pm #

      75

  10. Anjali October 29, 2016 at 4:23 pm #

    I have a querry, I supply my product to a shop on a 50% margin working,
    They ran an offer of 50% off on MRP on a discount sharing of 50% each.
    in this case what will be my margin if original MRP is 100.

  11. Marge December 11, 2016 at 3:03 pm #

    How do I know the unit cost? In the example is 100 but what is the formula to obtain this value?

  12. Ivy January 28, 2017 at 2:45 am #

    Am staring a new business but I don’t know how to put prices on my products?
    For example
    The wholesale price is $5,52 incl vat
    So how do I calculate the unit price,what percentage should I use?

  13. Osama May 23, 2017 at 3:40 am #

    So I came across this question
    “The goods are sold at a margin of 20% of sale price.”
    Now if cost is 112500, how can we calculate sale price?

  14. juan May 31, 2017 at 12:35 pm #

    as cost increases margin decreases right? for example, products i sell that cost me 20 i can retail for 40 but a item that cost me 100 probably won’t sell for 200. is there a rule of thumb to use as a guide as cost increases?

  15. Kristi July 11, 2017 at 3:24 am #

    If I have a customer that wants 25% margin and the sell price is fixed at 9.99 how do I work out a cost price for them?

    • Henry July 26, 2017 at 3:32 am #

      9.99 x 0.25 =2.4975 (rounded = 2.50)

      9.99 – 2.50 = 7.49

      to check if your answer is correct you go

      7.49 / 0.75 = 9.986′ (rounded = 9.99)

      OR

      (2.50 / 9.99) x 100 = 25.03%

  16. Chad August 12, 2017 at 1:50 pm #

    If I have a mix of Fixed and Variable costs (% of sales), what is the formula to achieve 20% profit margin? [Sum (Fixed Costs) / (1-sum(variable %)] = Breakeven; But dividing Breakeven by (1 – 0.20), doesn’t give me the 20%; probably due to variable %s.

  17. Kellie September 2, 2017 at 7:57 am #

    Hi, I need to determine how to keep a retailer margin whole after running a promotion.

    Example:
    Product cost to retailer :$10
    Product margin: 30%
    Normal selling price $14.29

    Please provide the calculation to determine how much we would need to fund to keep the retailer margin % whole given the promo sale price and fund the markdown.

    Thanks !!

  18. Melandri September 5, 2017 at 6:54 am #

    Please assist me by explaning this to me:

    Your gros profit margin is 16%, the cost price is R2000 work out what is the selling price, profit value and mark up %

    • waqas ali November 12, 2017 at 12:16 pm #

      Sales Price=(cost/(1-Desired Margin)

      =2000/.84
      =2380

      Profit =380

      Markup =380/2000*100
      = 19%

  19. Sanjay September 29, 2017 at 9:49 am #

    An unit 100 +5% tax 105 is purchased now want to sale it with 5%margin, what will be selling price

  20. Y December 14, 2017 at 9:27 am #

    How do I calculate unit cost without knowing the quantity? I have the Total Cost (for the specific item) and the related Total Retail or Selling Price. Is there a way to calculate the Quantity using this data? If not, is there another piece of information that is needed?

  21. steven January 27, 2018 at 5:31 am #

    Can anyone have knowledge for the question below?

    Sale price = 20
    Cost = 15.61

    Volume incentive 6%
    Commercial discount 8.10%

    THUS: Net cost price before dc fee and distribution cost is =>>
    15.61-6%-8.1% = 13.48

    Dc fee = 1.08
    Distribution cost = 0.2

    Wat is back margin% and wat is front margin%

    DC = distribution center

  22. Joss February 20, 2018 at 1:22 pm #

    Would this be correct?
    I want 40% in GP (1-0.40=0.60)
    My cost is 24.14 for an item

    24.14/ 0.60 = 14.48

  23. Jeanne February 21, 2018 at 4:18 am #

    Hi Steven
    I have a question please
    I am studying and am busy with a calculation that just does not make sense to me.

    They only give me 2 figures
    Retailer Cost Incl Vat 4681.60 and the gross margin of 16.2/3 now i am left with the calcultaion of Selling Price GP and Provit amount .

    Kind Regards
    Jeanne

  24. Gloria March 1, 2018 at 10:55 pm #

    What is the formula for profit when you are given markup and sales only

  25. Sumit March 26, 2018 at 2:44 pm #

    Hi, i have cost of product, desired margin and discount. how can i calculate the price of product?

  26. Manmohan May 19, 2018 at 11:28 pm #

    I have total 11 products….10 products overall margin is 14% on 11th product margin is 33% so overall margin how to calculate..??

  27. Glossy July 6, 2018 at 8:01 pm #

    Pls I have a cost of production as 99920 how can I arrived at a selling price

  28. anwar July 19, 2018 at 5:05 am #

    Product 1 has a ₹100 price and 25% profit
    margin, product 2 has ₹70 price and 30% margin. How do u determine which product is best

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