1. What is Margin Percentage?

Margin percentage is a financial metric that shows what percentage of the selling price is profit. It's calculated as the difference between selling price and cost, divided by the selling price.

2. How Does the Calculator Work?

The calculator uses the margin percentage formula:

Where:

• Selling Price — Final price to customer (in pounds)
• Cost — Cost to produce/purchase item (in pounds)

Explanation: The formula shows what portion of each pound in sales is actual profit after accounting for costs.

3. Importance of Margin Calculation

Details: Margin percentage is crucial for business planning, pricing strategies, and financial reporting. The UK government recommends this calculation for accurate profit reporting.

4. Using the Calculator

Tips: Enter selling price and cost in pounds. Both values must be positive numbers, and selling price must be greater than cost for a valid result.

5. Frequently Asked Questions (FAQ)

Q1: What's a good margin percentage?
A: This varies by industry, but generally 10-20% is considered good, while 5% might be typical for high-volume, low-margin businesses.

Q2: How is this different from markup?
A: Markup is calculated as (Selling Price - Cost)/Cost, while margin is (Selling Price - Cost)/Selling Price.

Q3: Why does the UK government recommend this calculation?
A: It provides a standardized way to compare profitability across businesses and sectors for taxation and economic analysis.

Q4: Should VAT be included in these calculations?
A: Typically no - margin calculations should use pre-VAT amounts for accurate profit measurement.

Q5: What if my cost is higher than selling price?
A: This indicates a loss, and the calculator will show a negative margin percentage.