Subject: Profit margin
Name: Kris
Who are you: Other

Hello,

I feel very silly having to ask this. I just started a new sales position and need to calculate profit margins based on my cost of a given product. For example I have a piece of equipment that costs me $102,077.73. I need to figure a profit margin of 18% from cost to arrive at my sale price. What is the best way to do this? What if I need to figure 16% or 19%? I have been given formulas that divide and others that multiply and they never equal the same number. Please help. Thank you!

 

Hi Kris,

If you want you profit margin to be 18% then you are saying that you want your profit to be 18% of your sale price and hence your cost is 82% of your sale price. Let C be your cost and P your sale price then

C is 82% of P or
C = 82/100 x P = 0.82 x P

If you divide both sides by 0.82 you get

P = C/0.82

In the example you gave with C = $102,077.73 you get

P = $102,077.73/0.82 = $124,485.04

Penny