When selling merchandise, your goal is to make money. To make money, you need to sell your product for more than it cost to produce or purchase your product. The amount above the cost is known as the margin. This is the profit you make on selling each item. This is a very important calculation for your business if the business is to become profitable. The business needs to have a margin, but it is important to keep the margin reasonable or consumers will look elsewhere for the product.
Determine your margin percentage and add one to the margin. For example, assume your margin is 20 percent, so one plus 0.2 equals 1.2.
Find your total costs. In the example, assume your total costs are $500.
Multiply your total costs by one plus the margin. In the example, $500 times 1.2 equals $600.
- UTK: Selling Price, Gross Margin & Mark-Up Determination
- Forbes. "Cash Account vs Margin Account: Which Do I Need?" Accessed Aug. 15, 2020.
- Corporate Finance Institute. "Maintenance Margin." Accessed Aug. 15, 2020.
- Charles Schwab. "Margin: How Does It Work?" Accessed Aug. 15, 2020.
- Merrill, Bank of America. "Investing in the margins." Accessed Aug. 15, 2020.
- Corporate Finance Institute. "Gross Margin Ratio." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development. "Adjustable Rate Mortgages (ARM)." Accessed Aug. 15, 2020.
- Consumer Financial Protection Bureau. "For an adjustable-rate mortgage (ARM), what are the index and margin, and how do they work?" Accessed Aug. 15, 2020.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.