To set a selling price for a target margin, divide the included cost by one minus the margin fraction. Use the calculator with discount and tax set to zero first, so you can verify the underlying price.
Open the Selling Price Calculator.
How to calculate selling price from cost and margin
A revenue margin states what fraction of the selling price remains after the included cost. If the desired margin is 40%, cost must occupy the other 60% of price. Divide cost by 0.60 to find that price.
Selling price = included cost ÷ (1 − desired margin percentage ÷ 100).
For an included cost of $60 and a desired margin of 40%, the calculation is $60 ÷ 0.60 = $100. The $100 price leaves $40 above cost, and $40 divided by $100 confirms the 40% margin.
Multiplying cost by 1.40 does something different. It gives an $84 price, which is a 40% markup on $60 cost. The $24 difference is only approximately 28.57% of $84 revenue. Keep the requested denominator clear before setting the price.
Business Victoria’s pricing guidance explains why confusing markup and margin can erode the intended result. The worked figures here are hypothetical arithmetic examples, not evidence that a customer will accept a particular price.
Define the costs that the target price must cover
Choose whether the included cost contains only the acquired product cost or also a stated allocation of overhead. The resulting margin describes that chosen cost boundary; it is not automatically a final net profit margin.
Suppose the base product cost is $60 and you allocate another 10% of that base cost to overhead. The overhead amount is $6, making the loaded cost $66. At a 40% desired margin on that loaded cost, the corresponding price is $66 ÷ 0.60 = $110.
The overhead percentage in this example is cost-based. It does not mean that overhead will be 10% of the eventual selling price. At $110 revenue, the $6 allocation is approximately 5.45% of revenue.
If the supplied cost already includes the same overhead allocation, set the calculator’s additional overhead field to zero. Otherwise the tool loads it a second time. A duplicated allocation changes the price without representing another real cost.
Per-unit allocations depend on volume assumptions. A fixed monthly expense divided among 1,000 units produces a different unit amount from the same expense divided among 600 units. Record whether your allocation uses observed sales, planned output, or capacity, and check the business-level result separately.
The Australian Government pricing strategy guide discusses including relevant costs when setting prices. A formula becomes useful when those inputs describe the actual offer and the expenses it needs to support.
Enter the calculator’s fields in a controlled order
Start with Cost Price = 60, Desired Profit Margin = 40, Overhead Allocation = 0, Planned Discount = 0, and Sales Tax = 0. The result should be $100. This is the simplest check of the cost-and-margin relationship.
Next, change Overhead Allocation to 10 while leaving the other optional adjustments at zero. The result becomes $110 because the tool first increases the cost to $66, then divides by the remaining 60% share of revenue.
The calculator applies a planned discount after calculating that margin-based price. A 10% discount reduces $110 to $99. It does not increase the initial list price to preserve the requested 40% margin after discount.
At $99 actual revenue and $66 loaded cost, the difference is $33. The actual post-discount margin is $33 ÷ $99, or approximately 33.33%. The desired margin input still says 40%, but that describes the pre-discount calculation in this tool.
Use the Sales Tax field only for a supplied applicable tax scenario, and distinguish the resulting customer payment from tax-exclusive business revenue. The calculator does not determine liability or the appropriate rate. Keep tax zero when your immediate question is the underlying revenue needed for a target margin.
Compare prices and verify the achieved margin
This table holds the included cost at $60, with overhead, discounts, and tax set to zero. Each row is independently checked by subtracting cost and dividing by price.
| Desired margin | Calculated price | Amount above included cost | Achieved margin before rounding |
|---|---|---|---|
| 20% | $75.00 | $15.00 | 20% |
| 25% | $80.00 | $20.00 | 25% |
| 40% | $100.00 | $40.00 | 40% |
| 50% | $120.00 | $60.00 | 50% |
| 60% | $150.00 | $90.00 | 60% |
A higher target margin raises the required price nonlinearly. Moving from 20% to 40% does not merely double the profit percentage applied to cost. The denominator changes from 0.80 to 0.60.
After rounding a price for actual use, recalculate the achieved margin from that rounded price. For example, a cost of $65 at a 40% target gives an unrounded price of $108.3333. A final $108.33 price produces a margin very slightly below 40%; a final $109 price produces approximately 40.37%.
Whether that difference matters depends on the purpose and scale of the pricing decision. Preserve enough precision internally to understand it, but do not present a currency-rounded quote as though it exactly reproduces an unrounded theoretical ratio.
Preserve a margin when planning a discount
If actual post-discount revenue must be $110, and a genuine 10% discount will be offered from a list price, divide $110 by 0.90. The required list price is approximately $122.22 before currency rounding.
A 10% reduction of that list price returns approximately $110. This discount gross-up is separate from the embedded calculator’s sequence. Entering a 10% discount in the tool without adjusting the list-price calculation reduces the margin-based result instead of preserving it.
The same distinction applies to repeated promotions. A first 10% discount and a second 5% discount leave 0.90 × 0.95 = 85.5% of the original price. They are not the same as a single 15% reduction.
Do not apply both an already discounted net revenue figure and the same discount again. Work from a clear sequence: base cost, loaded cost if used, required net revenue, list-price gross-up if needed, actual discount, and any separately collected tax.
A price-dependent transaction fee needs another term. If fees are a fraction of revenue, the intended margin and fee fraction both reduce the share available to cover fixed unit cost. This calculator has no dedicated percentage-fee input, so a complete fee-aware price requires a separate reconciliation.
Check feasibility before using the quoted price
A target margin below 100% is necessary for this simple positive-cost model. As the target approaches 100%, the denominator approaches zero and the required price becomes very large. A 100% margin cannot be achieved with positive included cost and finite revenue under these definitions.
The calculator’s input range limits the selectable margin. Do not bypass the range to obtain a percentage that the model cannot meaningfully support. Similarly, a zero-cost item needs careful interpretation because excluding real handling or fulfillment costs can make the apparent margin misleading.
The formula calculates a price requirement, not demand. Compare the proposed offer with your commercial evidence, capacity, and customer value proposition separately. A price that mathematically reaches a desired margin may generate too few sales to cover total fixed expenses.
Keep the cost date, allocation basis, target margin, planned promotion, and final actual price in the pricing record. When supplier costs or discount terms change, rerun the calculation from the new inputs and verify the achieved margin rather than assuming the old percentage survives unchanged.