1. What is Sales Margin Percentage?

Definition: Sales margin percentage is a profitability metric that shows what percentage of the selling price is profit.

Purpose: It helps businesses understand their pricing strategy effectiveness and overall profitability.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Margin % — Profitability percentage
• Selling Price — Final price to customer
• Cost Price — Cost to produce/purchase item

Explanation: The difference between selling and cost price is divided by selling price to get the profit ratio, then multiplied by 100 to convert to percentage.

3. Importance of Margin Percentage

Details: Understanding margin helps with pricing decisions, cost control, and overall financial health assessment.

4. Using the Calculator

Tips: Enter the selling price and cost price in dollars. Both values must be positive numbers, and selling price should be greater than or equal to cost price.

5. Frequently Asked Questions (FAQ)

Q1: What's a good margin percentage?
A: This varies by industry, but generally 10-20% is decent, while 20%+ is considered strong.

Q2: How is margin % different from markup %?
A: Margin is based on selling price, while markup is based on cost price. Margin shows profitability relative to revenue.

Q3: Can margin percentage be negative?
A: Yes, if cost price exceeds selling price, indicating a loss on the sale.

Q4: Should I include fixed costs in cost price?
A: This calculator uses direct costs only. For full profitability analysis, consider all costs.

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