Find the original sell price of an item given its cost and target margin. You can also calculate the margin or cost using the other tabs. Use the typical margin drop down to help you.
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Reverse Margin Formula
The calculator runs three formulas depending on which tab you select. All three start from the same definition: margin is profit divided by net sale, where net sale is the selling price after discount.
Max Cost mode solves for the highest cost you can pay and still hit your target margin:
Max Cost = Price * (1 - Discount/100) * (1 - Margin/100)
Check Margin mode tells you the actual margin you earn on a known cost and price:
Margin% = (Price * (1 - Discount/100) - Cost) / (Price * (1 - Discount/100)) * 100
Price Needed mode solves for the list price required to hit a target margin after a planned discount:
Price = Cost / (1 - Margin/100) / (1 - Discount/100)
- Price: list or sticker price before discount
- Discount: percent off the list price at checkout
- Net Sale: price actually collected, equal to Price × (1 − Discount/100)
- Cost: wholesale or unit cost of the item
- Margin: profit as a percent of net sale
- Markup: profit as a percent of cost
Max Cost is for buyers negotiating with suppliers. Check Margin verifies a deal you already have on the table. Price Needed is for setting a sticker price that survives a planned promotion.
Typical Margins and Margin vs. Markup
Use the table below as a sanity check on the target margin you enter. Numbers are rough industry averages on net sale.
| Industry | Typical Gross Margin |
|---|---|
| Grocery | 2% – 10% |
| Consumer electronics | 10% – 20% |
| General retail | 25% – 40% |
| Apparel and accessories | 45% – 55% |
| Restaurants (food cost) | 60% – 70% |
| Software / SaaS | 70% – 85% |
Margin and markup are not the same number. The same dollar of profit produces a smaller margin than markup.
| Margin | Equivalent Markup | Cost as % of Price |
|---|---|---|
| 10% | 11.1% | 90% |
| 20% | 25.0% | 80% |
| 30% | 42.9% | 70% |
| 40% | 66.7% | 60% |
| 50% | 100% | 50% |
| 60% | 150% | 40% |
| 75% | 300% | 25% |
Worked Examples
Example 1: Maximum cost on a discounted item. You plan to sell a jacket at $120 list with a standard 25% off promo, and you need a 40% margin on net sale.
- Net sale = 120 × (1 − 0.25) = $90.00
- Max cost = 90 × (1 − 0.40) = $54.00
If your supplier quote is above $54, you either renegotiate, raise the list price, or skip the discount.
Example 2: Price needed to absorb a discount. Your unit cost is $18 and you want a 50% margin even after a 20% off sale.
- Net sale needed = 18 ÷ (1 − 0.50) = $36.00
- List price = 36 ÷ (1 − 0.20) = $45.00
Set the sticker at $45 so the discounted price still clears your margin target.
FAQ
Why is my margin lower than my markup? Margin uses net sale as the denominator and markup uses cost. Since net sale is always larger than cost on a profitable sale, the margin percent is always lower.
What if I leave the discount blank? The calculator treats it as 0%. Net sale equals list price.
Can I enter a margin of 100% or more? No. A 100% margin would mean cost is zero, and anything above that has no real interpretation. Stay below 100%.
Does this include taxes, shipping, or fees? No. The result is gross margin on the product itself. Subtract variable selling costs from your cost input if you want a contribution margin instead.
