Profit margin Calculator: measuring notes and method
Read the profit as a share of the sale
The equivalent markup can exceed the target margin because markup divides profit by cost, while margin divides it by selling price.
Define what the cost includes
Gross profit is not necessarily net profit after business overheads. Use a consistent tax basis for cost and selling price.
CHECK A PRACTICAL EXAMPLE
A margin target uses the selling price
Both options start from a cost of 1,000 currency units.
20% margin
- Selling price
- 1,250 currency units
- Gross profit
- 250 currency units
25% margin
- Selling price
- 1,333.333 currency units
- Gross profit
- 333.333 currency units
A 25% margin requires dividing cost by 0.75. Adding 25% to cost instead gives a 20% margin; choose either target margin or markup rather than applying both.
Fixed comparison in metric units. Values are illustrative unless linked to a recorded project; changing the calculator above does not change this example.
Formula
Selling price = cost ÷ (1 − margin ÷ 100). Gross profit = selling price − cost.
Worked example
Illustrative values match Reset example and stay fixed when you edit the calculator.
Starting-value worked example
- Total cost
- 1,000 currency units
- Target gross margin
- 20 %
Selling price: 1,250 currency units
Follow the calculation
- Selling price = 1,000 ÷ (1 − 20 ÷ 100) = 1,250.
- Gross profit = selling price − 1,000. Margin uses selling price as the denominator.
Reviewed 19 October 2026. How calculations are checked · Report a correction