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. 

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:

  1. First, determine the gross profit ($). 
    • The gross profit ($) is given as: 68.
  2. Next, determine the average inventory cost ($). 
    • The average inventory cost ($) is provided as: 175.
  3. 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 = ?