Measure profit dollars and margin percent after cost of goods sold.
Overview
Profit margin shows what share of revenue remains after covering the cost of goods sold. It is a quick test of whether a price list can support the business.
Enter revenue and cost to see profit and margin percent. Small price or cost changes can move the percentage sharply.
Do not confuse margin with markup: markup divides profit by cost, while margin divides profit by revenue.
Steps
Total sales for the period.
Cost of goods sold for the same period.
Review profit dollars and margin percent.
Raise or lower revenue to model a new price.
Run again for each product line you sell.
Math
margin% = (revenue − cost) / revenue × 100
Profit is revenue minus cost. Divide by revenue for margin percent.
Worked cases
Profit $40,000 → 40%
40% margin.
Profit $28,000 → 28%
28% margin.
Profit $1,750 → 35%
35% margin.
Why use this
Questions