Set a price from your cost and a target margin or markup, and see the profit per unit.
Margin method: price = cost ÷ (1 − margin %).
Markup method: price = cost × (1 + markup %).
Margin is profit ÷ price. Markup is profit ÷ cost.
A bakery’s cake costs $12 in ingredients and labor. For a 40% margin, the price is $20.00 and profit $8.00, which is a 66.7% markup. Using a 40% markup instead would give only $16.80.
Use it to price products, menu items or service packages. Include labor in the cost of services, not only materials.
Remember to cover card fees and taxes where they apply. This calculator does not add sales tax.
A candle maker’s 8-ounce jar costs $7.40 in wax, fragrance, glass, wick and labor. With the method set to target markup at 120%, the price is $16.28 and profit is $8.88 per candle. That 120% markup works out to a 54.5% margin on the selling price.
The margin and markup lines describe the same price two ways, so check which one your plan or buyer means. The price is only right if unit cost includes everything, including packaging, card fees and shipping supplies. The result is not rounded to a price point, so decide whether to round up to protect margin or down to a familiar figure.
Markup is profit as a share of cost. Margin is profit as a share of the selling price. The same product always has a higher markup than margin, which is why mixing them up leads to underpricing. Margin = markup / (1 + markup), and markup = margin / (1 – margin).
| Markup on cost | Gross margin on price | Price for a $10 cost |
|---|---|---|
| 25% | 20% | $12.50 |
| 33.3% | 25% | $13.33 |
| 50% | 33.3% | $15.00 |
| 66.7% | 40% | $16.67 |
| 100% | 50% | $20.00 |
| 150% | 60% | $25.00 |
For anything your team makes, prepares or assembles, the cost is not only materials. Say a gift basket uses $6.00 of products and takes 15 minutes to put together, and the person doing it costs you $18 an hour once payroll taxes are included. Labor adds $4.50, so the real cost is $10.50. For a 40% margin the price is $10.50 / (1 – 0.40) = $17.50. Priced on materials alone at the same margin, it would have been $10.00, and every basket would have lost money.
The minutes per unit are the number most owners guess. Time a few batches, or compare total hours worked on production days with units made, and update the figure when your process changes. Then round to a price point customers recognize, check it against what competitors charge, and keep sales tax out of the calculation, since it is collected on top of the price rather than part of your margin.
Retail and finance usually talk margin; trades often use markup. Know which you mean.
Yes, for services and prepared products.
No.
Check your margin after the discount too.
Run the calculator twice from the same unit cost, once with your wholesale target and once with the retail target. Retailers often expect to roughly double a wholesale price, so check that your wholesale price still covers cost and profit at that level.
Margin is profit as a share of price, so 100% would mean the cost is zero. Any real cost needs a margin below 100%, while markup has no upper limit, which is why markup mode accepts 120% or 200%.
More for the same job
Instead of adding up timesheets before you open the selling price calculator, let EZTime total employee hours. Book a demo to see it with your team.