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Q: i need the formula for calculating the margin ( Answered,   3 Comments )
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 Subject: i need the formula for calculating the margin Category: Business and Money Asked by: jamier-ga List Price: \$2.00 Posted: 04 Nov 2004 13:33 PST Expires: 04 Dec 2004 13:33 PST Question ID: 424533
 ```example: I must pay a supplier \$60 what must I charge a customer to ensure a 24% margin of profit? I know one way to calculate is to divide 65 by .76 or 76%. Is there another way? If I charge my customer \$65, what is the formula to see what my margin of profit is?```
 Subject: Re: i need the formula for calculating the margin Answered By: hammer-ga on 04 Nov 2004 13:54 PST
 ```If you know your cost, then you can find the price you must charge by multiplying the cost by 1 plus the percent of profit you want. In the example above: Cost = \$60 Required Profit = 24% 60 * 1.24 = 74.4 You must charge at least \$74.40 to achieve your required profit margin. The formula for markup percentage is (Sell Price - Cost) / Sell Price. Cost = \$60 Sell Price = \$65 (65 - 60) / 65 = .0769 Markup Percentage is 7.69% Additional Resources --------------------- Entrpreneur Article showing several simple business calculations http://www.entrepreneur.com/article/0,4621,265229,00.html Search Strategy --------------- calculate markup formula - Hammer``` Clarification of Answer by hammer-ga on 05 Nov 2004 04:55 PST ```Jamier, Nitrobait is correct for that type of calculation. I saw you were dividing 65 (your sell price) rather than 60 (your cost) and thought that you were looking for a different number. If the examples I've given are not what you were looking for, please let me know. - Hammer```
 ```This answer is incorrect. Profit margin is defined as (sales-cost)/sales, which is equivalent to cost/(1-(profit%/100)). To achieve 24% on an item that costs \$60, you have to charge \$78.95 \$60/.76). Dividing 60 by .76 is not equivalent to multiplying 60 by 1.24.```
 ```Seems to me that there are two issues here: markup and margin. Generally the margin is the difference between the selling price and the cost. So if you want a margin (often called gross margin or gross profit) then you divide the cost by 1-your required margin. Using the numbers given if you want a margin of 24% you divide by 1-0.24=0.76. So on a \$60 cost you get a selling price of 60/0.76 = \$78.95. The margin is thus \$18.95. The % margin is 18.95/78.95 = 0.24: 24%. The markup is the selling price divided by the cost In the above case the markup is 78.95/60 = 1.3158 or 31.58% In the question the markup is 65/60 = 1.0833. This is often referred to as an 8.33% markup If you carefully read the reference given in the answer you will find that it agrees with the above and gives a lot more detail.```
 ```Another consideration, separate from the calculation. With a number as low as 24%, I wonder if you may be looking for NET margin versus GROSS margin of 24%. A gross margin of 24%, to which overhead and other costs must still be applied, would get me hung by most of my clients/employers. Net margin (on a gross 24% margin) could be as small as 9% or so... Hardly worth anyone's time. I use a spreadhsheet model that allows me to apply additional costs so that I can determine my net. I have a minimum net margin metric of 20%, and I typically wind up with a gross margin between 40% and 60%, depending on the product. Of course, if this is simply a mathmatical excercise versus a business problem, my 2 cents aren't worth the time it took me to write this note. Either way, if I understand the question correctly, which is debatable, reh-ga's methodology is correct. :-)```