Price a product from materials, labour, overheads and sales fees to hit a target margin, with or without VAT.
Gross Margin Calculator
Calculate gross margin, the price needed for a target margin, or the maximum cost you can afford.
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How it works
- Margin % = (price − cost) ÷ price × 100
- Price for a target margin = cost ÷ (1 − margin ÷ 100)
- Maximum cost for a target margin = price × (1 − margin ÷ 100)
- Equivalent markup % = margin ÷ (100 − margin) × 100
Margin answers “how much of each sale do I keep?”; markup answers “how much did I add to cost?”. Use VAT-exclusive figures if you are a VAT vendor.
Example
A product costs R60 and you want a 40% margin. 60 ÷ (1 − 0.40) = R100. Adding 40% to cost would give only R84 — a 28.6% margin.
If competitors sell at R100 and you want 40%, the most you can pay your supplier is 100 × 0.6 = R60.
Frequently asked questions
What is gross margin?
Gross margin is the share of the selling price you keep after paying the direct cost of the item: (price − cost) ÷ price × 100.
How do I find the price for a target margin?
Divide the cost by (1 − margin ÷ 100). For a 40% margin on a R60 cost: 60 ÷ 0.6 = R100. Note this is not the same as adding 40% to the cost.
Can a margin be more than 100%?
No. Margin is profit as a share of the selling price, so it is always below 100%. Markup has no upper limit.
What does “maximum cost” mean?
If the selling price is set by the market, it is the most you can pay for an item and still achieve your target margin: price × (1 − margin ÷ 100).
Related tools
Find the selling price from cost and markup, or the markup from cost and price.
Calculate gross and net profit from price, unit cost, units sold and fixed costs.
Add or remove VAT, or work back from a VAT amount. Shows net, VAT and total, with South Africa’s 15% as the default rate.
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