Margin on $5 cost, $1 revenue
Profit margin, markup, and profit breakdown for $5 cost, $1 revenue. Adjust any field below to try your own numbers.
Margin
-400.0%
Markup
-80.0%
Profit
-$4.00
Example
Selling for $1.00 an item that cost $5.00 yields ($4.00) in profit — a -400.0% margin (equivalent to a -80.0% markup on cost).
Selling price split between cost and profit
- Cost: $5.00
- Profit: -$4.00
What is a Margin Calculator?
A margin calculator finds the relationship between what something costs, what it sells for, and how much profit that generates — expressed both as a profit margin (percentage of the selling price) and a markup (percentage of the cost). Enter any two of cost, revenue, or margin, and the calculator solves for the rest.
Margin is one of the most important numbers in pricing and business planning: it tells you what share of every sales dollar is actually profit, after covering the cost of the item itself. A thin margin means small price changes or cost increases can wipe out profit; a wide margin gives more room to absorb costs, discounts, or price competition.
Margin, Markup, and Profit Formulas
Margin vs. Markup — Why They're Different Numbers
Margin and markup both measure profit, but against different bases — margin divides profit by the selling price (revenue), while markup divides profit by the cost. For the same sale, this always makes the markup percentage larger than the margin percentage. An item that costs $50 and sells for $100 has a 50% margin (profit ÷ revenue = $50 ÷ $100) but a 100% markup (profit ÷ cost = $50 ÷ $50). Confusing the two is a common and costly pricing mistake — a business aiming for a 50% margin that instead applies a 50% markup ends up with only a 33% margin, well short of its target.
Gross Margin vs. Net Margin
This calculator computes gross margin — the profit left after subtracting only the direct cost of the item (materials, wholesale purchase, or direct production cost). It does not subtract overhead like rent, salaries, marketing, or shipping. Net margin, a broader measure, subtracts all business expenses from revenue, not just the direct cost of goods sold. A healthy gross margin does not automatically mean a profitable business if operating expenses are high relative to revenue.
Setting a Price Target from a Desired Margin
If you know your cost and want to hit a specific margin, don't just add that percentage to the cost — that gives you the markup, not the margin. Instead, divide the cost by (1 − target margin). For example, to earn a 40% margin on an item that costs $30: $30 ÷ (1 − 0.40) = $50. Selling at $50 gives a $20 profit on $50 revenue, which is exactly 40%. This calculator's "solve for revenue" mode does this division automatically.
Example — Your Current Inputs
Selling for $1.00 an item that cost $5.00 yields ($4.00) in profit — a -400.0% margin (equivalent to a -80.0% markup on cost).
Additional Example — Retail T-Shirt
A boutique buys t-shirts wholesale for $12 each and sells them for $28. Profit is $28 − $12 = $16. Margin is $16 ÷ $28 = 57.1%, meaning 57 cents of every sales dollar is profit. Markup is $16 ÷ $12 = 133.3%, meaning the selling price is more than double the wholesale cost.
About These Parameters
- Cost
- The direct cost to acquire or produce one unit — the wholesale price you pay a supplier, or the direct materials and labor cost if you manufacture the item. Leave this blank if you already know the margin and revenue and want to find the cost.
- Revenue (Selling Price)
- The price the item actually sells for. Leave this blank if you know the cost and your target margin and want to find the price you need to charge to hit that margin.
- Margin
- Profit as a percentage of the selling price, not the cost. Retail margins commonly range from 20–50% depending on the industry; leave this blank if you want the calculator to compute margin from your cost and revenue.
Frequently Asked Questions
Is a 50% margin the same as a 50% markup?
No, and this is the single most common margin mistake. A 50% margin means profit is 50% of the selling price (cost is also 50% of the price, so cost equals profit). A 50% markup means profit is 50% of the cost, which works out to only a 33.3% margin. Always double-check which one you're targeting before setting a price.
What's a "good" profit margin?
It depends heavily on industry. Grocery and wholesale distribution often run on thin margins (2–10%), while software, luxury goods, and specialty retail can see margins of 50–90%+ because the marginal cost of production is low relative to price. Compare your margin to others in your specific industry rather than a universal benchmark.
Does this calculator account for taxes or overhead?
No. This is a gross margin calculator — it only accounts for the direct cost of the item itself. Taxes, rent, salaries, shipping, and marketing all come out of gross profit separately, so your actual net profit margin will be lower than the gross margin shown here.
Can margin be negative?
Yes — if the selling price is lower than the cost, profit is negative and so is the margin, meaning you're losing money on every sale. This can happen intentionally with loss-leader pricing (selling one item at a loss to drive other sales) or unintentionally when costs rise faster than prices are updated.