When you're manufacturing a product, it's important to know how much money you are generating from it. One metric you can use is profit margin. The profit margin is the difference between your net sales and the cost of those sales. It can be represented as a dollar value, or -- as is often the case -- as a percentage of sales.
Add up the net sales for the product, which would be the sum of total sales less discounts and returns.
Add up the total cost of your sales. This includes the cost of manufacturing the product, including raw materials, labor and depreciation on equipment; selling costs, including salaries, sales materials and marketing; and any other costs you incurred to make and sell the product.
Subtract your cost of sales from your total sales revenue. This will give you your profit margin as a dollar value. For example, if the product has $70,000 in net sales and $30,000 in cost of sales, you would have a margin of $40,000.
Divide the dollar value of your profit margin by your net sales. Using the above example you would divide the dollar value of the margin, $40,000, by your net sales of $70,000 to arrive at a profit margin of 57 percent.
