1. What Is Margin Percentage?

Margin percentage represents the percentage of revenue that is profit after accounting for the cost of goods sold. It's a key metric for understanding business profitability.

2. How Does the Calculator Work?

The calculator uses the margin formula:

Where:

• Selling Price — Final price to customer (in dollars)
• Cost — Cost to produce or acquire the product (in dollars)

Explanation: The formula calculates what percentage of the selling price is profit after covering the cost.

3. Importance of Margin Calculation

Details: Understanding your margin helps in pricing strategies, financial planning, and assessing business health. Healthy margins vary by industry but generally should cover all business expenses beyond just product costs.

4. Using the Calculator

Tips: Enter the selling price and cost in dollars. Both values must be positive numbers, and selling price should be greater than cost for a valid margin calculation.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between margin and markup?
A: Margin shows profit as percentage of selling price, while markup shows profit as percentage of cost. They represent different perspectives on pricing.

Q2: What is a good margin percentage?
A: This varies by industry, but generally 10-20% is considered good, while 5% might be typical for high-volume, low-margin businesses.

Q3: Can margin be more than 100%?
A: No, since cost can't be negative, maximum margin is 100% (when cost is zero).

Q4: How does margin relate to business profitability?
A: While important, margin doesn't account for operating expenses. Gross margin shows product profitability, while net margin shows overall business profitability.

Q5: Should I use margin or markup for pricing?
A: Margin is generally more useful for understanding profitability, while markup is often used for initial price setting.