# Margin Calculator

Profit Margin ﹣ Calculator

The Margin Calculator is used to calculate the margin trading, gross margin (profit margin or trade margin), the absolute margin, the markup percentage, and the relative markdown margin, as well as costs, revenues, and many other key figures. Based on the last two entries you input, all the other relevant figures related to the margin trading are calculated.

## General Information on the Profit Margin

Profit Margin is an important term in the business world and refers to the difference between the price of a product or service and the cost of producing or providing the product or service. Margin is usually expressed as a percentage and shows how much profit a company makes per unit sold. A higher margin means that a company makes more profit, while a lower margin means that a company is making less profit.

There are different types of margins, including gross margin, operating margin, and net margin. Gross margin refers to the difference between the selling price and the direct cost of producing or procuring a product or service. The operating margin refers to the difference between the sales and the operating costs of a business, including wages, rent, and other overhead costs. The net margin refers to the profit after deducting taxes and other expenses.

It is important to note that a high margin does not necessarily mean that a business is successful, as the margin is also influenced by other factors such as the competitive environment and demand for products or services. Businesses also need to keep an eye on costs to ensure that they are and remain profitable.

## Input Aids for the Margin Calculator

Below you will find information on the individual input fields of the margin calculator. In general, your last two entries are used to calculate all other values. You can identify the two most recent entries by the fact that the respective field has a darker border.

### Costs (cost price)

Please enter the cost or cost price. You can therefore enter the purchase price or the manufacturing price here in order to calculate the margin or gross margin. In addition to the pure purchase or production costs, costs that can be allocated proportionately, such as labor costs or lease, can also be added to the costs. The following applies:

#### Formula for costs

Revenue − Margin = Costs

### Markup in % (calculation markup)

Please enter the desired markup on the costs as a percentage. This markup, also called calculation markup, markup margin, or markup range, looks at the calculation "from the bottom up" and asks: What percentage of the costs is added to them to arrive at the revenue or sales price? Or also: What percentage of the costs corresponds to the margin?

#### Formula for markup

(Revenues − Costs) * 100 / Costs = Markup in Percentage

#### Example for the calculation of the markup

With a cost of 450 and a markup of 10 percent, the sales are 495 , because 10 percent of 450 is 45 . The sum of costs and markup finally forms the revenue of 495 . And here is the example calculation using the formula for the markup: (495 − 450 ) * 100 / 450 = 10%

### Margin in (or other currencies)

Please enter the margin in . The margin is the difference between the costs and the revenue, i.e., the margin between the purchase price and the sales price. It therefore applies as follows:

#### Formula for margin

Revenue − Costs = Margin

#### Example of the calculation of the margin

With a total cost of 450 and a revenue of 500 , the margin is 50 .

### Margin in % (Gross Margin)

Please indicate the margin in percent. In contrast to the markup in percent, the margin in percent, often called the gross margin, takes a view "from above": What percentage of the revenue is the difference between costs and revenue? It is therefore often also called the markdown margin or markdown range. As a result, one might wonder: What percentage of revenue does the margin correspond to?

#### Formula for margin in percent or formula for gross margin (markdown margin)

(Revenue − Costs) * 100 / Revenue = Margin in percent (Gross Margin)

#### Example of the calculation of the margin in percent

With a revenue of 500 and a margin of 10%, the cost is 450 , because 10% of 500 is 50 . And here is the example calculation using the formula for the margin: (500 − 450 ) * 100 / 500 = 10%

### Revenue

Please enter the revenue. So, please enter the sales price or turnover to calculate the margin or gross margin. It therefore applies as follows:

#### Formula for the revenue

Costs + Margin (gross margin) = Revenue (sales price)

## How is margin calculated?

The margin describes the difference between the sales price of a product or service and the associated costs. A distinction is made between the absolute margin, which is a margin in (or other currencies), and the relative margin, which is a margin expressed as a percentage.

### How is the absolute margin calculated?

The absolute margin is the actual margin in (or other currencies) that a company earns per product or service sold. It is calculated by subtracting the costs from the revenue or sales. The formula is:

Absolute Margin = Revenue - Costs

Example: A company sells a product for 100 . The manufacturing cost is 60 . The absolute margin is 100 - 60 = 40 . The company thus achieves an absolute margin of 40 per product sold.

### How is the relative margin calculated?

The markup percentage indicates the percentage share of the margin trading in the revenue. It is calculated by dividing the absolute margin by the revenue and multiplying the result by 100. The formula is:

Markup Percentage = (Absolute Margin / Revenue) x 100%

Example: The company from the above example has a revenue or sales of 1000 . The markup percentage is (40 / 100) x 100% = 40%. The company therefore has a markup percentage of 40%, which means that 40% of sales remains after all costs have been deducted.

## What is the difference between margin and profit?

Margin and profit are two different concepts in business administration. Margin refers to the difference between the sales revenue and the variable costs of a product or service. It therefore indicates how much money is left over to cover the fixed costs and make a profit. Profit is the result that remains after all costs (including fixed costs) have been deducted. It therefore indicates how much money the company actually made. In summary, margin is the difference between sales and variable costs, while profit is the result that remains after all costs have been deducted.

## Can you make a high profit with a low margin or trading spread?

In principle, it is possible to make a lot of profit with low margins, but it depends on various factors. A low margin means that the price of the product or service is only slightly higher than the variable costs. However, if the company is able to sell a sufficiently large number of units, it can still make a high profit. Discount retailers form a typical example of how a high profit can possibly be achieved with low margins. However, there are also limits to the profitability of low-margin businesses. When the margin is too low, it can be difficult to cover fixed costs and make a profit. In addition, it may be more difficult to differentiate from competitors if the company only focuses on low prices. Overall, it depends on how well the company controls its costs and how effectively it markets its products or services to generate enough revenue to cover its fixed costs and still make a profit.

## Calculate Retailer Margin and Markup in 65 seconds

Finally, a video on the topic of "Calculate Retailer Margin and Markup". Here, within 65 seconds, the difference between margin and mark-up is clearly explained.

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## Source information

As source for the information in the 'Profit Margin' category, we have used in particular:

## Last update on March 14, 2023

The last changes in the 'Profit Margin' category were implemented by Stefan Banse on March 14, 2023. The main changes were:

• 13.03.2023: Publication of the Margin Calculator together with associated texts.
• Editorial revision of all texts in this category