Gross Margin Calculator

What this tool does

CM8-09 works out the true gross margin of a product or job — not just price minus material, but price minus everything that varies with each unit sold: material, labour, subcontract work, freight both ways, packaging, scrap, commissions and payment fees. It then rolls your whole product list into a blended portfolio view, floats the worst margins to the top, and tells you the break-even point for your fixed costs.

Everything runs inside this single HTML file. No installation, no account, no network requests — your prices, costs and volumes never leave your computer.

Margin vs markup — they are not the same number

This is the most expensive confusion in small-business pricing. Both describe the same profit, but against different bases:

Example: cost 100, price 150. The markup is 50 %, but the margin is only 33.3 %. If your accountant says “we need 40 % margin” and you apply a 40 % markup, you actually earn a 28.6 % margin — an 11-point shortfall on every sale.

• Markup applied to cost — Resulting margin
• +25 % — 20.0 %
• +33 % — 25.0 %
• +50 % — 33.3 %
• +100 % — 50.0 %
• +150 % — 60.0 %

The costs people forget

Most “40 % margin” products are really 25 % products once the quiet costs are counted. The line builder puts them front and centre:

• Freight in — inbound shipping is part of material cost (accountants call it “landed cost”). A 5 % freight bill on materials silently eats margin.
• Freight out — “free shipping” is never free; if you absorb it, it is a variable selling cost of every unit.
• Packaging — cartons, void fill, labels, pallets, strapping.
• Scrap & rework — if 5 % of production is scrapped or reworked, every good unit carries that cost. The tool uplifts material, inbound freight, labour and subcontract cost by your allowance.
• Commissions — sales rep, marketplace or platform fees taken as a percentage of the selling price.
• Payment fees — card processing typically takes 1.5–3.5 % of the sale.
• Outsourced operations — plating, painting, heat treating, assembly done by others; easy to omit when quoting from a bill of materials.
• Other direct costs — amortised tooling, consumables, licence royalties, warranty reserves.

The cost model, exactly

Why two profit lines? Gross margin is the classic accounting measure — price less cost of goods. Contribution goes one step further and removes the costs that only occur because a sale happened (commission, card fee, outbound freight). Contribution is the number that pays your fixed costs, so it drives the break-even helper.

Scrap deliberately does not uplift packaging or outbound freight: scrapped units are (usually) never packed or shipped. If your process scraps packed goods, fold that into the allowance percentage.

Target pricing: divide, never multiply

To hit a target margin, the required price is:

Multiplying cost by (1 + target) gives a markup, not a margin, and undershoots every time. The solver in the Line Builder does the division for you and offers both bases; the contribution basis is the honest one when commissions and fees scale with price (raising the price also raises those costs, and the divisor accounts for that).

Portfolio & break-even

• Volumes: enter expected units per period (month, quarter — your choice, just be consistent). Edit them directly in the table.
• Blended margin is total margin ÷ total revenue — a revenue-weighted average, so one high-volume low-margin line can drag the whole book down.
• Worst-first sorting puts the lines that need repricing at the top. Lines below your flag threshold are marked LOW; negative-margin lines are marked LOSS in both text and colour.
• Break-even: with fixed costs F and blended contribution ratio r, break-even revenue = F / r. Break-even units divide F by the average contribution per unit at the current mix — both are only valid while the mix holds.

Saving your work

• Autosave: your lines, editor inputs and settings are kept in this browser's local storage automatically (see the indicator in the top bar) and restored the next time you open the file.
• Save project (.json): a complete portable snapshot — move it between machines or keep it with the job file.
• Export CSV: every input and computed column, ready for a spreadsheet or ERP import.
• Print report: a clean portfolio sheet via your browser's print dialog (save as PDF works too).
• Currency is a label only — changing it never converts values.

Scope & limits

• This is a direct-cost (variable-cost) margin tool. It does not allocate overhead into unit cost; overhead belongs in the fixed-cost line of the break-even helper. That is deliberate — absorption costing hides which products actually contribute.
• Taxes (sales tax, VAT/GST) are excluded: enter tax-exclusive prices and costs.
• Volume discounts, tiered commissions and stepped fixed costs are not modelled — duplicate a line per tier if you need that.
• All results are estimates from your inputs. Verify against your accounts before committing prices.