What this calculator does
Profit Margin compares a product’s selling price with its cost and calculates the gross profit, margin percentage, and related pricing values. It can also work backward: enter a cost and desired margin to estimate the required selling price. The tool is intended for quick scenario planning rather than accounting or tax reporting.
Margin is not markup
Margin measures profit as a percentage of selling price: (price − cost) ÷ price. Markup measures profit as a percentage of cost: (price − cost) ÷ cost. They are not interchangeable. A product costing $60 and selling for $100 has $40 gross profit, a 40% margin, and a 66.7% markup.
What belongs in cost
The result is only as useful as the cost input. Depending on the decision, cost may include materials, labor, packaging, transaction fees, freight, sales commissions, warranty allowance, or other variable expenses. Fixed overhead and taxes may need separate treatment. Using purchase cost alone can overstate the profitability of a sale.
Using the result
Compare several realistic prices instead of relying on a single target. A higher margin per unit may reduce demand, while a lower margin may require more volume to cover fixed expenses. This calculator does not forecast demand or determine whether a price is competitive, so combine it with customer, volume, and market information.
Common questions
Can margin exceed 100%? Not under the usual definition when price and cost are nonnegative, because profit is divided by selling price. Can markup exceed 100%? Yes; a $50 cost sold for $125 has a 150% markup. Should tax be included? Use values consistently and follow the accounting treatment appropriate to the decision. For planning, separate sales tax collected for authorities from operating revenue unless your reporting rules say otherwise.
Related tools: Pricing Calculator, Feature Cost Calculator, and Loan Calculator.