What this calculation means
Target-margin pricing finds a selling price that leaves the chosen percentage of that price after the entered cost is deducted.
Only the cost you enter is included. Other expenses are not added automatically. With a positive cost, a 100% target margin cannot be reached at a finite price.
How to use this calculator
Enter the total included cost for one item or serving, then enter the target gross margin as a percentage below 100. Use the same item, serving size, and included costs when comparing prices.
Formula and variables
Price = Direct cost ÷ (1 − Target gross margin ÷ 100)
- Direct costUSD
- Total included cost for one item or serving. Keep the included costs consistent when comparing prices.
- Target gross margin%
- Percentage of the selling price you want to remain after deducting the entered cost; enter a value below 100.
Dollar amounts display to cents, with exact half-cent values rounded away from zero; intermediate calculations keep full precision.
Understand your result
The result is the price needed to leave the chosen margin after the cost you entered. Any expenses you did not include still have to be paid from the remaining amount.
Worked example
Direct cost is $5 and target gross margin is 70%.
Direct cost: 5 USD
Target gross margin: 70 %
- A 70% target margin leaves 30% of price for the entered cost.
- Divide $5 by 0.30 = $16.666666…; display $16.67.
Example result: $16.67
Frequently asked questions
Can I enter my markup percentage as the target?
No. Markup divides by cost while margin divides by price. Use the markup-pricing route for a cost-based addition.
Does this target guarantee net profit?
No. The margin covers only the cost you entered. Any omitted labor, overhead, or other expenses must still be paid from the remaining amount.