How to Calculate a Margin on Something You Sell

by Charlotte Johnson

Whether you're having a one-time sale or you regularly sell goods or services, making a profit is critical to your business endeavor. A margin is a business term that refers to the profit margin, or the percentage of the selling price of a product or service that is profit. Calculating a margin involves determining how much it costs you to sell an item. Once you've figured this amount, you can perform some simple mathematical operations to determine the margin of your financial transaction.

1. Calculate how much it costs to sell a particular product. For example, if you are selling cookies at a bake sale, add the cost of ingredients that were required to make the cookies. Include any other expenses that are involved, such as the cost of gas to drive to the bake sale. If you're running a regular business, rather than a one-time bake sale, you'll need to account for other expenses, such as rent and the cost of baking equipment. If you have to hire people to help, this is also an expense. All of these expenses are often referred to as overhead.

2. Subtract personal costs from the sales price of the item or items. This is also known as your "net income." For example, consider a bake sale in which you sell 10 dozen cookies for a total of $80. If the ingredients cost you $20, you would subtract 20 from 80 to get 60.

3. Divide your answer from Step 2 by the sales price of the item of items. In this example, you would divide 60 by 80 to get 0.75.

4. Multiply your quotient from Step 3 by 100 to find the percentage margin. In this case, you would multiply 0.75 by 100 to get a margin of 75 percent profit.

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