Margin Calculator

Who should use Margin Calculator

• Retailers and wholesalers setting shelf prices from supplier cost
• Sellers who receive a target margin from a buyer and need the price that delivers it
• Anyone auditing whether a discount still clears the contribution needed to cover overheads

How to use it, step by step

1. Enter your landed cost per unit including freight and packaging.
2. Enter either the selling price or the margin you want to achieve.
3. Read the corresponding margin, markup and gross profit per unit.
4. Test a discounted price to see how much margin the promotion consumes.

Margin versus markup

Margin measures profit as a share of the price you sell at. Markup measures the same profit as a share of what you paid. Margin can never exceed 100%; markup can. Retail buyers, marketplaces and accountants almost always mean margin.

Gross profit = Price - Cost
Margin % = (Price - Cost) / Price x 100
Markup % = (Price - Cost) / Cost x 100
Price for a target margin = Cost / (1 - Target margin)

Worked example: Rs 300 cost, 40% target margin

• Required price = 300 / (1 - 0.40) = Rs 500
• Gross profit = 500 - 300 = Rs 200
• Margin = 200 / 500 = 40%
• Markup = 200 / 300 = 66.7%

Adding 40% to cost would have produced Rs 420 and only a 28.6% margin — a Rs 80 per unit shortfall against the target on every single sale.

Common mistakes to avoid

• Adding the target margin percentage to cost instead of dividing by (1 - margin).
• Using invoice cost rather than landed cost, which understates true cost by the freight and packaging you already paid.
• Applying a flat percentage discount without checking that the discounted margin still covers fixed overheads.
• Treating gross margin as profit — it is before overheads, marketing, returns and tax.

How to read the result

Set a floor margin that covers your overhead per unit plus the return rate for that category, then treat any price below the floor as a deliberate, budgeted acquisition cost rather than a sale.

Frequently asked questions