1. What is Product Margin?

Product margin is a measure of profitability that shows what percentage of the selling price is profit. It's calculated by subtracting the cost from the price and dividing by the price.

2. How Does the Calculator Work?

The calculator uses the margin formula:

Where:

• \( Price \) — Selling price in USD
• \( Cost \) — Product cost in USD

Explanation: The formula calculates what portion of the selling price remains after accounting for the product cost.

3. Importance of Margin Calculation

Details: Understanding product margins is essential for pricing strategy, profitability analysis, and business decision-making. It helps determine if products are priced appropriately.

4. Using the Calculator

Tips: Enter the product price and cost in USD. Price must be greater than or equal to cost. The calculator will display margin both as a decimal and percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's a good product margin?
A: This varies by industry, but generally 20-30% is considered good, while 50%+ is excellent.

Q2: How is margin different from markup?
A: Margin is (Price - Cost)/Price while markup is (Price - Cost)/Cost. Margin shows profit as percentage of price.

Q3: Can margin be negative?
A: Yes, if cost exceeds price, but this indicates a loss rather than profit.

Q4: Should I use gross or net costs?
A: For product margin, use direct costs (COGS). For net margin, include all operating expenses.

Q5: How often should I calculate margins?
A: Regularly, especially when costs change or when evaluating pricing strategies.