Calculate business cost, total revenue, or cost ratio from any two values with this calculator for business revenue and expense analysis.
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Cost Ratio Formula
The cost ratio compares business cost to total revenue and expresses the result as a percentage. A lower cost ratio generally means a smaller share of revenue is being used to cover costs.
CR = (BC / TR) * 100
To solve for business cost:
BC = (CR / 100) * TR
To solve for total revenue:
TR = BC / (CR / 100)
- CR = cost ratio, expressed as a percentage
- BC = business cost, in dollars
- TR = total revenue, in dollars
The calculator can solve for any one missing value when you enter the other two. If you enter business cost and total revenue, it calculates the cost ratio. If you enter cost ratio and total revenue, it calculates the business cost. If you enter business cost and cost ratio, it calculates the total revenue.
Cost Ratio Interpretation
Cost ratio meaning depends on the type of business and which costs are included. The table below gives a general way to read the result.
| Cost Ratio | General Meaning | Example Interpretation |
|---|---|---|
| Under 40% | Low cost share | Costs use less than 40 cents of each revenue dollar. |
| 40% to 70% | Moderate cost share | Costs take a noticeable but manageable share of revenue. |
| 70% to 100% | High cost share | Most revenue is being used to cover costs. |
| Over 100% | Costs exceed revenue | The business cost is greater than the revenue for the period. |
Common Cost Ratio Inputs
| Input | What to Include | Important Note |
|---|---|---|
| Business Cost | Operating costs, production costs, service costs, or another defined cost category | Use the same cost definition when comparing periods. |
| Total Revenue | Gross sales or total income for the same period | Revenue should match the same time period as the cost. |
| Cost Ratio | The percentage of revenue used by the cost | Enter as a percent, not a decimal. For 25%, enter 25. |
Example Problems
Example 1: Calculate cost ratio
You have a business cost of $30,000 and total revenue of $120,000.
CR = (30000 / 120000) * 100
CR = 25%
The cost ratio is 25%. This means 25 cents of each revenue dollar is used for the selected business cost.
Example 2: Calculate business cost
You know the cost ratio is 35% and total revenue is $80,000.
BC = (35 / 100) * 80000
BC = 28000
The business cost is $28,000.
FAQ
What is a good cost ratio?
A good cost ratio depends on the business type, pricing model, and cost category being measured. In general, a lower cost ratio is better because less revenue is being consumed by costs. However, some industries normally have higher cost ratios because materials, labor, inventory, or delivery costs are a large part of sales.
Can the cost ratio be over 100%?
Yes. A cost ratio over 100% means the business cost is greater than total revenue for the period. For example, if costs are $110,000 and revenue is $100,000, the cost ratio is 110%.
Should revenue be gross revenue or net revenue?
Use the revenue figure that matches the analysis you want to perform. Gross revenue is common when measuring costs against total sales. Net revenue may be more useful if you want to compare costs after returns, discounts, or allowances. The key is to use the same revenue definition when comparing results over time.
