Profit margin from price and cost
PremiumIn D2, work out the profit margin of the mug: the profit, B2-C2, as a share of the price in B2. Use (B2-C2)/B2.
| A | B | C | D | E | F | |
|---|---|---|---|---|---|---|
| 1 | Product | Price | Cost | Margin | ||
| 2 | Mug | 50 | 30 | |||
| 3 | Plate | 80 | 60 | |||
| 4 | Bowl | 40 | 26 | |||
| 5 | Vase | 250 | 150 | |||
| 6 | ||||||
| 7 | ||||||
| 8 |
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Why this works
The mug sells for 50 and costs 30, so the profit is 20. As a share of the price, that is 20 / 50 = 0.4, or 40%. Dividing by the cost instead gives 67%, which is the markup: the same profit seen from the cost.
Common mistake: Dividing by the cost, (B2-C2)/C2. That gives the markup, 67%, not the margin.
The answer
- D2
=(B2-C2)/B2
Subtract the cost from the price and divide by the price, =(B2-C2)/B2, then format the cell as a percentage. A price of 50 and a cost of 30 give 40%.
Both start from the same profit. Margin divides it by the price and markup divides it by the cost, so a 40% margin is a 67% markup.