Enter the gross profit ($) and the average inventory cost ($) into the Return on Margin Calculator. The calculator will evaluate and display the Return on Margin.
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Return on Margin Formula
The following formula is used to calculate the Return on Margin.
ROM = GP / AIC *100
- Where ROM is the Return on Margin (%)
- GP is the gross profit ($)
- AIC is the average inventory cost ($)
How to Calculate Return on Margin?
The following example problems outline how to calculate Return on Margin.
Example Problem #1:
- First, determine the gross profit ($).
- The gross profit ($) is given as: 68.
- Next, determine the average inventory cost ($).
- The average inventory cost ($) is provided as: 175.
- Finally, calculate the Return on Margin using the equation above:
ROM = GP / AIC *100
The values given above are inserted into the equation below and the solution is calculated:
ROM = 68 / 175 *100 = 38.85 (%)
Example Problem #2:
For this problem, the variables needed are provided below:
gross profit ($) = 90
average inventory cost ($) = 150
This example problem is a test of your knowledge on the subject. Use the calculator above to check your answer.
ROM = GP / AIC *100 = ?
