Profit Margin Calculator

Most profit margin calculators take a cost and a price and hand back one percentage. That is where the trouble starts, because many people then use that percentage the wrong way round. A 30% margin and a 30% markup sound alike, but on a cost of 70 one means a price of 100 and the other a price of 91. This calculator shows both readings of the same percentage next to each other, with the money lost per unit when they are mixed up, so you see which number you actually meant.

It then carries your numbers straight on, with nothing to re-type. The cost you entered prices a target margin, and both prices — the right one and the mixed-up one — go into a break-even table. You see in one place how many more units the mistake would make you sell before covering rent, wages and software.

How to use the profit margin calculator

1. Enter your cost and selling price for one unit. You get the profit per unit, the margin and the markup straight away.
2. Type the percentage you had in mind in the second section — the “30%” a supplier, a boss or a spreadsheet gave you. The table shows the price if it is read as a markup on cost and the price if it is read as a margin on price.
3. Set a target margin, or leave it on the same percentage. You get the price you need, the markup to add to cost, and the highest cost that keeps the target at your current price.
4. Add your fixed costs for a period, plus any other cost each sale brings (shipping, packaging) and payment fees as a percentage. The break-even table compares your price, the target-margin price and the mix-up price.
5. Optionally add a target profit to see how many units it takes to earn it on top of break-even.

The formulas

Everything starts from two numbers: the cost per unit C and the selling price P.

Profit per unit   = P − C
Margin            = (P − C) ÷ P
Markup            = (P − C) ÷ C
Markup from margin m   = m ÷ (1 − m)
Margin from markup k   = k ÷ (1 + k)
Price for margin m     = C ÷ (1 − m)
Price for markup k     = C × (1 + k)
Highest cost at P for margin m = P × (1 − m)

Margin and markup are the same profit seen from two sides. Margin asks “how much of each sale do I keep?” Markup asks “how much did I add to what I paid?” Because the price is always bigger than the cost when you make money, margin is always the smaller number. The gap is small at low percentages and grows quickly:

Break-even uses the cost-volume-profit model taught in every managerial accounting course (for example, OpenStax Principles of Accounting, Volume 2, chapter 3). With fixed costs F, other per-unit costs O and fees charged as a share of price f:

Variable cost per unit = C + O + f × P
Contribution per unit  = P − variable cost per unit
Break-even units       = F ÷ contribution per unit   (rounded up)
Units for a profit T   = (F + T) ÷ contribution per unit

If the contribution is zero or negative, every sale loses money before fixed costs are even counted, and the calculator says you will never break even at that price.

Worked examples

Example 1: one profit, two percentages

A shop buys a lamp for 70 and sells it for 100. The profit is 30 a lamp. As a margin that is 30 ÷ 100 = 30%. As a markup it is 30 ÷ 70 = 42.86%. Both are correct; they just answer different questions. If the shop’s owner reports “30%” to a partner who thinks in markup, the partner will picture a price of 91.

Example 2: the same 30% gives two prices

The owner wants a 30% margin on the next lamp, which also costs 70.

Adding 30% to the cost leaves 9 a unit on the table. Over 1,000 lamps that is 9,000 of profit that was planned but never made, and the margin report at the end of the quarter will show 23% instead of 30%.

Example 3: pricing for a target margin

To earn a 40% margin on the 70 lamp, the price must be 70 ÷ 0.6 = 116.67. That is a 66.67% markup. If the market will not accept more than 100, the other lever is cost: at a price of 100 a 40% margin allows a cost of at most 100 × 0.6 = 60, so the shop has to buy the lamp 10 cheaper.

Example 4: break-even, and what the mix-up costs in volume

The shop’s fixed costs are 9,000 a month. At a price of 100, each lamp contributes 30, so it breaks even at 9,000 ÷ 30 = 300 lamps, or 30,000 of sales. At the mixed-up price of 91, each lamp contributes 21, and 9,000 ÷ 21 = 428.6, so it needs 429 lamps — 129 more for the same zero profit.

Fees change the picture too. Add 4 of shipping per lamp and a 2.9% card fee: the variable cost at 100 becomes 70 + 4 + 2.90 = 76.90, the contribution falls to 23.10, and break-even rises to 9,000 ÷ 23.10 = 389.6, so 390 lamps. To earn 6,000 of profit on top with no fees or shipping, the shop would need (9,000 + 6,000) ÷ 30 = 500 lamps.

Common mistakes

• Adding the margin to cost. Multiplying cost by 1.3 gives a 30% markup, not a 30% margin. For a margin, divide by 0.7.
• Comparing a margin with a markup. Industry averages and supplier quotes may use either. Convert one into the other before comparing.
• Forgetting the costs that come with each sale. Card fees, marketplace commission, packaging and free shipping all eat into the contribution. A healthy margin on the product alone can still mean a slow break-even.
• Treating fixed costs as per unit. Rent does not go up with each sale. Keep it in fixed costs and let the break-even spread it across units.
• Rounding break-even down. 428.6 units means you are still short after 428. Always round up.
• Discounting from a thin margin. A 20% sale on a product with a 30% margin wipes out two-thirds of the profit per unit. The discount calculator shows the sale price, and you can enter it here as the selling price to see the new margin and break-even.

Glossary

• Cost per unit — what one unit costs you to buy or make.
• Gross profit per unit — selling price minus cost per unit.
• Margin — gross profit as a share of the selling price. Also called gross margin.
• Markup — gross profit as a share of the cost.
• Keystone pricing — doubling the cost: a 100% markup, which is a 50% margin.
• Fixed costs — costs that stay the same whatever you sell in the period: rent, salaries, subscriptions.
• Variable costs — costs that come with every unit sold: the product itself, shipping, fees.
• Contribution — what each sale leaves after variable costs, available to pay fixed costs and then profit.
• Break-even point — the number of units, or the sales total, at which profit is exactly zero.

To measure the return on money you put into stock, equipment or a whole business over several years, the ROI & CAGR calculator compares results held for different lengths of time. For quick percentage changes, use the percentage calculator. Every figure on this page is an estimate for planning prices, not financial or tax advice — sales tax, returns, discounts and costs that change with volume are not included unless you add them.

Last reviewed: October 18, 2026