# Gross Margin Calculator

To use our Margin Calculator, simply:

- Enter the Cost Price
- Enter the Selling Price
- Enter the Number of Units
- Let our calculator do the rest!

## How to Calculate the Gross Margin

Gross Margin calculations, Gross Profit per unit calculations, and the Total Gross Profit calculations, are all very simple calculations. In order to do these calculations, you will need both the cost price, and the selling price.

*Gross Margin = Selling Price / Cost Price*

*Gross Profit per Unit = Selling Price - Cost Price*

*Total Gross Profit = Number of Units x Gross Profit Per Unit*

## What Can Margin Calculations Be Used For?

Margin calculations are useful when it comes to calculating the profit earned from sales. The margin is the difference between the costs and the sale price of products.

#### What is the Cost Price?

Your cost prices will vary. Don't make the mistake of setting the price of your product as the cost of the product because this will not include the manufacturing costs such as staffing costs, machine costs, and anything else that contributed to putting together your product. If you are a larger company, it can sometimes be more complicated to calculate your true operational costs. Large businesses usually use a baseline margin and work from a set margin. For example, if they work off of the knowledge of a 20% margin, this means they are making an approximate 8% profit after deducting the operational costs. Small companies have more specific margins, whereas larger companies will estimate.

#### What is the Selling Price?

The selling price of a product is the price that is paid by the buyers of your product. In order to make profit, your selling price will always have to be above the cost price. Although sometimes, large companies will sell at a price lower than the cost price. This is mostly done in supermarkets. This makes the profit margin negative and results in financial losses. This is done from a marketing standpoint in order to attract more customers to a certain product, and can sometimes be an effective sales technique.

#### What is the Number of Units?

The number of units is simply the amount of items that you have sold. If you sell one banana, then that single banana is a unit. If you sell a bag of bananas, then that bag of bananas is a unit.

#### What is the 'Mark Up' Percentage?

The mark up percentage is the difference between both the set selling price and the cost price, in a percentage format. If the mark up percentage is 100%, then the price has been doubled.

#### What is the Gross Profit per unit?

The Gross Profit per unit is the profit value that has been made on either a single item, or a single use of your service.

#### What is the Total Gross Margin?

The Total Gross Margin is the total profit that is made after all your units have been sold.

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