Target Margin Price Calculator

Set a selling price from unit cost and a desired profit margin.

Unit cost

Desired margin

Profit as a share of the selling price.

Results update as you type.

Selling price

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Profit per unit—

How it works

A target margin price calculator answers the pricing question every seller faces: given what an item costs me and the profit margin I want to earn, what price must I charge? You enter the unit cost and the desired margin as a percentage of the selling price, and the tool returns the price that hits that margin along with the resulting profit per unit. The subtlety it handles is that margin is defined against the selling price, not the cost, so you cannot simply add the margin percentage to the cost. If you want a 20 percent margin on an item that costs $40, charging $48 does not work — that is a 20 percent markup and only a 16.7 percent margin. The correct price is $50, because $10 of profit is 20 percent of the $50 price. The divide method used here builds that relationship in directly: dividing cost by one minus the target margin grosses the cost up to the exact price at which the margin holds. This is the reverse of the usual margin calculation, working backward from a goal to the price that achieves it. Retailers, manufacturers and service providers use it to price catalogues consistently, to protect margins when input costs rise, and to quote confidently knowing each sale delivers the profit they planned. It removes the common and costly error of confusing markup with margin and quietly under-pricing, ensuring the number on the shelf actually produces the profit the business needs.

Formula

Selling price = unit cost ÷ (1 − desired margin) · Profit = price − cost

Margin is profit as a share of the selling price, so if you want a 20 percent margin, the cost must represent the other 80 percent of the price. Dividing the unit cost by one minus the target margin — here by 0.8 — grosses the cost up to the full price at which the desired margin holds exactly. Subtracting the original cost from that price gives the profit per unit, which will equal the target margin times the price.

Source:Standard pricing (margin-based pricing) mathematics

We review all our tools from time to time to ensure accuracy.

Worked example

Unit cost:40Desired margin:20

Selling price = 40 ÷ (1 − 0.20) = 40 ÷ 0.8 = $50. Profit per unit = $50 − $40 = $10.

How to use this calculator

1
Enter your values
Enter unit cost and desired margin.
2
Adjust the options
Fine-tune any options to match your situation.
3
Read your result
Selling price updates instantly as you type — no button to press.

Frequently asked questions

Why can't I just add the margin to the cost?

Because margin is defined against the selling price, not the cost. Adding a 20 percent margin to a $40 cost to get $48 actually produces only a 16.7 percent margin, since the $8 profit is measured against the $48 price. To earn a true 20 percent margin you must divide the cost by one minus the margin, giving $50. Adding the percentage to cost gives you a markup, which is always a different and smaller margin.

What is the difference between margin and markup pricing?

Markup pricing adds a percentage of the cost on top of the cost, while margin pricing sets the price so profit is a target percentage of the selling price. The same desired profit produces a higher markup number than margin number, because the two use different bases. This calculator uses margin, which is how finance measures profitability, so the price it returns delivers exactly the margin you enter rather than a markup that looks similar but earns less.

What happens as the desired margin approaches 100%?

As the target margin gets closer to 100 percent, the required selling price rises steeply and heads toward infinity, because you are asking for a price where almost none of it is cost. A margin of 100 percent is impossible, since it would mean the item cost you nothing. That is why the calculator caps the margin below 100 percent. Very high margins demand very high prices relative to cost, which the market must be willing to bear.

How do I choose the right target margin?

Balance what the market will pay against the margin your business needs to cover overhead and profit. Research competitor pricing, understand your customers' price sensitivity, and know your fixed costs so you can see how much margin each sale must contribute. Higher margins improve profitability per unit but can reduce volume if they push the price above what buyers accept. Many businesses set category-level target margins and price every product to hit them consistently.

Does this price cover all my costs?

This calculator works from the unit cost you enter, so it only guarantees the margin over that specific cost. If the unit cost includes only direct product cost and excludes overhead like rent, salaries and marketing, the margin it produces is a gross margin, not a net one. To ensure a price covers everything and still profits, either build overhead into the unit cost or set the target margin high enough to leave room for the fixed costs below the gross line.