What the Pricing Calculator Does
The pricing calculator converts a target gross margin into a selling price. It supports two approaches that sellers routinely confuse. Cost-plus pricing adds a markup percentage on top of unit cost; margin-based pricing works backwards from the margin you want to keep after the sale. A 65% markup and a 65% margin produce very different prices, and only the margin method guarantees the profit share you planned. Our editorial analysis of common pricing errors shows this single confusion is responsible for a large share of underpriced products, because a markup that sounds generous quietly delivers a much thinner margin.
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Price = Unit Cost / (1 - Target Margin)
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What each input means
- Unit Cost — the full cost of one unit: materials or wholesale price, packaging, inbound freight, and any per-unit fees. Leave nothing out; an incomplete cost base understates the price.
- Target Margin — the share of the final selling price you intend to keep as gross profit, expressed as a decimal (65% = 0.65). This is a share of price, not a markup on cost.
- Price — the selling price before sales tax or VAT.
Worked example
A product costs $18 per unit, fully loaded. You want a 65% gross margin.
- Subtract the margin from 1: 1 − 0.65 = 0.35.
- Divide cost by that figure: $18 / 0.35 = $51.43 (rounded to $51.43).
- Verify: profit per unit is $51.43 − $18 = $33.43, and $33.43 / $51.43 = 0.65 — a true 65% margin.
Had you applied a 65% markup instead, the price would be $18 × 1.65 = $29.70, and the actual margin only ($29.70 − $18) / $29.70 = 39.4%.
Limitations — when not to rely on this
The formula prices from your costs, not from the market. It says nothing about what buyers will pay, what competitors charge, or how demand changes with price. It also assumes unit cost stays constant; volume discounts, currency swings, and rising freight can move your real cost after the price is set. Treat the result as a floor for profitability testing, then check it against market prices before committing.