Price from target margin calculator
Enter a unit cost and the gross margin you want to keep. The calculator returns the selling price, the gross profit per unit and the equivalent markup. Add a fee rate if a percentage of every sale goes to card processing, a marketplace or a sales commission.
Formulas used
With a fee charged as a % of price: price = cost ÷ (1 − target margin − fee rate)
Gross profit after fee = price − cost − fee rate × price
Equivalent markup on cost = (price − cost) ÷ cost
The fee version works because a percentage fee scales with the price you are solving for, so it belongs in the denominator rather than being added to cost.
Worked examples (illustrative)
- No fee. Cost $60, target margin 40%: price = $60 ÷ 0.60 = $100. Gross profit $40; markup 66.67%.
- With a 3% fee. Cost $60, target margin 40%, fee 3% of price: price = $60 ÷ (1 − 0.40 − 0.03) = $60 ÷ 0.57 ≈ $105.26. Fee ≈ $3.16; gross profit after the fee ≈ $42.11, which is 40% of $105.26.
- The common mistake. Adding the fee to cost first ($60 + 3% × $100 = $63) and then pricing for 40% gives $105.00, and the real fee at that price is $3.15, so the margin after fee lands just under 40%. The gap is small here but grows with higher fee rates and margins.
Price needed for common margins on a $60 cost
| Target margin | Price | Gross profit | Markup on cost |
|---|---|---|---|
| 20% | $75.00 | $15.00 | 25% |
| 30% | $85.71 | $25.71 | 42.86% |
| 40% | $100.00 | $40.00 | 66.67% |
| 50% | $120.00 | $60.00 | 100% |
Each extra 10 points of margin costs more price than the last, because the denominator (1 − margin) shrinks. Going from 40% to 50% margin needs a $20 price increase on this cost; going from 20% to 30% needs only about $10.71.
Checks before you use the price
- Is the cost complete for one unit (freight, packaging, duties)?
- Is the target margin a gross margin, before rent, salaries and tax? Net margin will be lower; see gross vs net margin.
- Will you discount from this price? A planned 10% discount needs a higher list price; see discounts and margin.
- Does the result make sense against what customers actually pay? This arithmetic does not test demand.
Why can't the target margin be 100%?
A 100% margin means the cost is zero. For any positive cost, the denominator 1 − margin reaches zero and the required price becomes infinite, so the tool limits the margin plus fee to below 100%.
Is this the same as markup pricing?
No. Markup pricing multiplies cost by (1 + markup). A 40% markup on $60 gives $84, a 28.57% margin. Use the margin and markup calculator to compare.
Sources for definitions
Definitions follow standard accounting usage as presented in the sources above. All dollar figures on this page are our own illustrative arithmetic.
Educational arithmetic only. Results do not set a suitable price or establish suitability for any lending, investment or business decision. See Use & limitations.