1. What is Margin Percentage?

Margin percentage represents the percentage of profit earned on sales after accounting for the cost of goods sold. It indicates how much of each dollar in revenue is actual profit.

2. How Does the Calculator Work?

The calculator uses the margin formula:

Where:

• \( \text{Selling Price} \) — Final price at which product/service is sold
• \( \text{Cost} \) — Cost of producing or acquiring the product/service
• \( \text{Margin %} \) — Profit margin expressed as percentage

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

3. Importance of Margin Calculation

Details: Margin calculation is crucial for business profitability analysis, pricing strategies, financial planning, and determining the viability of products or services.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between margin and markup?
A: Margin is calculated as (Selling Price - Cost)/Selling Price, while markup is (Selling Price - Cost)/Cost. Margin shows profit percentage of revenue, markup shows percentage over cost.

Q2: What is a good margin percentage?
A: Good margins vary by industry, but generally 10-20% is considered good, while 5-10% is average. High-margin industries can achieve 20-50% or more.

Q3: Can margin be negative?
A: Yes, if cost exceeds selling price, margin becomes negative, indicating a loss on each sale.

Q4: How often should I calculate margin?
A: Regularly monitor margins, especially when costs change, during pricing reviews, or when introducing new products/services.

Q5: What factors affect profit margin?
A: Material costs, labor, overhead, competition, market demand, pricing strategy, and operational efficiency all impact profit margins.