How Turbo Inventory calculates your Margin

Created by David Joyce, Modified on Tue, 3 Aug, 2021 at 8:26 PM by David Joyce

Turbo Inventory uses margin calculation (over the ability to price your products using Markup. The difference between margin and markup is that margin is sales minus the cost of goods sold, while markup is the the amount by which the cost of a product is increased in order to derive the selling price.

A mistake in the use of these terms can lead to price setting that is substantially too high or low, resulting in lost sales or lost profits, respectively.

More detailed explanations of the margin and markup concepts are as follows:

Margin (also known as gross margin) is sales minus the cost of goods sold. For example, if a product sells for €100 and costs €70 to manufacture, its margin is €30. Or, stated as a percentage, the margin percentage is 30% (calculated as the margin divided by sales).
Markup is the amount by which the cost of a product is increased in order to derive the selling price. To use the preceding example, a markup of €30 from the €70 cost yields the €100 price. Or, stated as a percentage, the markup percentage is 42.9% (calculated as the markup amount divided by the product cost).

When referencing Sales Turbo Inventory calculates the margin based on your sales been exclusive of VAT. This mean that is the sales are €100 (which includes the 23% VAT), then this would take 23% off the €100 making it €81.30.

The following bullet points note the differences between the margin and markup percentages at discrete intervals:

To arrive at a 10% margin, the markup percentage is 11.1%
To arrive at a 20% margin, the markup percentage is 25.0%
To arrive at a 30% margin, the markup percentage is 42.9%
To arrive at a 40% margin, the markup percentage is 66.7%
To arrive at a 50% margin, the markup percentage is 100.0%

Turbo Inventory has a little cheat sheet where you can see the formula for calculating the Margin, if you want to work it out yourself

Also there is a very good web site that had a great widget for calculating these figures and include Margin and Mark Up figures, check it out over here