1. What Is Margin?

Margin represents the difference between the selling price of a product or service and its cost. It's a key financial metric that helps businesses understand their profitability on each sale.

2. How To Calculate Margin

The basic margin formula is:

Where:

• \( Selling Price \) — The price at which the product/service is sold (USD)
• \( Cost \) — The cost to produce or acquire the product/service (USD)

Margin Percentage Formula: \[ Margin \% = \left( \frac{Margin}{Selling Price} \right) \times 100 \]

3. Importance of Margin Calculation

Details: Calculating margin is essential for pricing strategies, financial planning, and determining business profitability. It helps businesses set appropriate prices and identify areas where costs can be reduced.

4. Using the Calculator

Tips: Enter the selling price and cost in USD. Both values must be positive numbers. The calculator will compute both the absolute margin and the margin percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between margin and markup?
A: Margin is calculated as a percentage of the selling price, while markup is calculated as a percentage of the cost.

Q2: What is a good margin percentage?
A: This varies by industry, but generally, a 10% margin is average, 20% is good, and 5% is low.

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

Q4: How often should I calculate margin?
A: Regularly, especially when costs change or when evaluating new products/services.

Q5: Does margin include all expenses?
A: This calculator uses direct costs. For full profitability analysis, include all overhead expenses.