Margin formulas and calculator
How to calculate product margins
Published by Cydney Mar Last updated: November 2026
To calculate a product margin, subtract the unit cost from the selling price, then divide by the selling price.
The Cost Sheet, published by Cydney Mar, uses one formula for every margin question: margin equals selling price minus unit cost, divided by selling price. A product that costs $40 and sells for $100 has a 60% gross margin. The calculator below runs that math and shows markup next to it.
How to calculate margins on a product?
Enter the full landed cost of one unit and the price you receive for it. The calculator returns gross margin, gross profit per unit and markup on cost. If you have not built your unit cost yet, start with the product costing calculator, then come back here to test different prices.
Gross margin
60.0%
- Gross profit per unit
- $60.00
- Markup on cost
- 150.0%
Assumes margin is measured on selling price and markup on cost, per unit, in one currency. Estimate only, not financial advice.
Gross margin, in plain terms
What is gross margin?
Gross margin is the share of the selling price you keep after paying for the product itself. On The Cost Sheet it is written as (price minus unit cost) divided by price. It is always a percentage of the price, which is why it can never reach 100%: that would need a unit that costs nothing.
Gross margin is not net profit. Marketing, fulfillment, salaries, rent and software still come out of it. It is the first test of a product, not the last: if gross margin is thin, nothing below it can be healthy.
Worked examples from published sources
- Calculator Soup (opens in a new tab) shows revenue as cost plus profit: 100 + 25 = $125. Worked through, that is a 20% margin and a 25% markup.
- Zendesk (opens in a new tab) uses net sales of $10,000 and COGS of $6,000 for a 40% gross profit margin.
- Sage (opens in a new tab) uses a $100 selling price and $40 profit: ($40 divided by $100) times 100 is a 40% margin.
- Sage also sets up an item that costs $150 with a 25% target margin. Divided by 0.75, that is a $200 selling price.
Calculate margin from any two numbers
You do not always start with cost and price. Each row below uses the same product, a $40 cost and a $100 price, so you can see every formula land on the same 60% margin.
| You know | Formula | Example | Margin |
|---|---|---|---|
| Cost and price | (price minus cost) / price | ($100 minus $40) / $100 | 60% |
| Profit and revenue | profit / revenue | $60 / $100 | 60% |
| Profit and cost | profit / (cost + profit) | $60 / ($40 + $60) | 60% |
| Cost and markup % | markup / (100 + markup) | 150 / (100 + 150) | 60% |
| Revenue and markup % | cost = revenue / (1 + markup) | $100 / 2.5 = $40 cost | 60% |
| Profit and markup % | cost = profit / markup | $60 / 1.5 = $40 cost | 60% |
How to calculate profit margins of a product, step by step
Build the full unit cost
Include materials, labor, packaging, freight, duties and allowances, not just the factory price.
Use the price you actually receive
For retail that is your wholesale price, not the shelf price.
Subtract cost from price
The result is gross profit per unit.
Divide by price
Multiply by 100 to read it as a percentage.
Check against your channel
DTC brands should also check contribution margin after acquisition costs.
How to calculate profit margins of a product in Amazon
Marketplace selling adds per unit fees that sit between the price and your profit. Subtract your landed unit cost, the referral fee, the fulfillment fee and your advertising cost per unit from the selling price, then divide by the selling price. Fee schedules change and vary by category and size, so pull current figures from your seller account and enter them as costs in the product costing calculator before setting a price.
Common questions
See all 48 questions in the FAQHow to calculate margin on a product?
To calculate margin on a product, subtract the unit cost from the selling price, divide the result by the selling price, and multiply by 100. A product that costs $40 and sells for $100 has a $60 gross profit and a 60% margin. Margin is always a share of the price, never a share of the cost.
How do I calculate a 30% profit margin?
To calculate a 30% profit margin, divide your unit cost by 0.70, which is 1 minus 0.30. A product that costs $35 needs a $50 price to earn a 30% margin, because $15 of profit is 30% of $50. Adding 30% to the cost instead gives a price of $45.50 and only a 23.1% margin.
Does 20% margin mean 20% profit?
A 20% gross margin means 20 cents of every sales dollar is left after the cost of the product, not 20% net profit. Marketing, fulfillment, salaries, rent and other expenses still come out of that 20 cents. Net profit is what remains after all of those costs, so it is usually lower than gross margin.
How do I find margin if I only know profit and cost?
Add profit and cost to get revenue, then divide profit by revenue. Calculator Soup's margin calculator uses the example of a $100 cost and $25 profit, giving $125 in revenue. Working that example through: $25 divided by $125 is a 20% margin, while the markup on cost is 25%.
How do I calculate gross profit margin for a whole product line?
Subtract cost of goods sold from net sales, divide by net sales, and multiply by 100. Zendesk's profit margin guide uses net sales of $10,000 and COGS of $6,000, which gives a 40% gross profit margin. The same method works for one SKU or an entire collection over a season.
Is a 70% gross margin good for a company?
A 70% gross margin is high for a physical product, above the 30% to 60% range Product Marketing Alliance publishes, and it sits at the low end of the 70% to 90% range Founderpath lists for SaaS and software. For a consumer product company, 70% usually signals strong pricing power or a lean cost structure, provided every cost line is counted.
Want an expert on your numbers before you commit?
Cost and Margins is one stage of Cydney Mar's Concept-to-Reality Pathway, which takes founders from product clarity to prototypes, suppliers, production readiness and launch in retail, TV or DTC.