Quick Answer: Calculate gross profit, profit margin, markup, target selling price, and trading margin requirements from cost, revenue, and percentage assumptions.
How This Calculator Works
Margin compares profit to selling price, while markup compares profit to cost. This calculator separates those relationships so pricing, profitability, and margin requirements are easier to evaluate.
Worked Scenario: Scenario: Pricing a Product for a Target Margin
A business buys or produces an item for $70 and wants a 30% gross margin on the selling price.
Scenario Inputs
- Cost: $70
- Target margin: 30%
- Formula: Price = Cost / (1 - Margin)
Outcome: Dividing 70 by 0.70 gives a selling price of 100. The business earns 30 of gross profit, which is 30% of the 100 selling price.
Formula and Methodology
Profit = Revenue - Cost
Margin% = Profit / Revenue * 100
Markup% = Profit / Cost * 100
Target selling price = Cost / (1 - Target margin%)
Trading margin required = Position value * Margin requirement%
Variables
- Revenue: Selling price or total sales value
- Cost: Cost of goods, acquisition cost, or basis for the transaction
- Profit: Revenue minus cost
- Margin: Profit as a percentage of revenue
- Markup: Profit as a percentage of cost
Assumptions
- Inputs are pre-tax and exclude shipping, discounts, fees, and other operating expenses unless included by the user.
- Target margin mode treats the entered percentage as gross margin on selling price, not markup on cost.
- Stock trading margin requirement is a simple collateral calculation and does not model maintenance calls or broker-specific rules.
Limitations
- Gross margin does not equal net margin because operating expenses, interest, and taxes are not included.
- Negative or zero denominators can make margin and markup undefined; the calculator returns 0 for undefined percentage outputs.
Practical FAQs
What is the difference between margin and markup?
Margin is profit divided by revenue. Markup is profit divided by cost. The same sale can have a 30% margin and a 42.86% markup because the denominators are different.
How do I calculate selling price from a desired margin?
Divide cost by one minus the target margin as a decimal. For example, a 70 cost and a 30% target margin gives 70 / 0.70 = $100.
Can profit margin be negative?
Yes. If cost is greater than revenue, gross profit is negative and the margin shows a loss relative to the selling price.