1. What is Margin Calculation?

Margin calculation determines the percentage difference between the selling price (excluding VAT) and the cost of goods. It shows what percentage of the selling price is profit.

2. How Does the Calculator Work?

The calculator uses the margin formula:

Where:

• Price (ex VAT) — Selling price before VAT is added
• Cost — Cost of goods or production

Explanation: The formula calculates what portion of the selling price remains after accounting for the cost of goods.

3. Importance of Margin Calculation

Details: Understanding your margin is crucial for pricing strategies, profitability analysis, and business planning. It helps determine if your pricing covers costs and generates sufficient profit.

4. Using the Calculator

Tips: Enter the selling price (excluding VAT) and the cost in dollars. Both values must be positive numbers, and the price must be greater than the cost for a valid margin calculation.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between margin and markup?
A: Margin shows profit as a percentage of the selling price, while markup shows profit as a percentage of the cost.

Q2: What is a good margin percentage?
A: This varies by industry, but generally, a 10-20% margin is considered good for most businesses.

Q3: Should I include VAT in margin calculations?
A: No, margin should be calculated on the price excluding VAT as VAT is tax collected for the government, not part of your revenue.

Q4: How does margin relate to profitability?
A: Higher margins generally mean higher profitability, but you also need to consider volume and fixed costs.

Q5: Can margin be more than 100%?
A: No, margin cannot exceed 100% as it represents the portion of the selling price that is profit.