1. What is Profit Margin Per Unit?

Profit margin per unit is a financial metric that shows what percentage of each dollar in revenue a company keeps as profit after accounting for the cost of goods sold. It's a key indicator of pricing strategy and operational efficiency.

2. How Does the Calculator Work?

The calculator uses the profit margin formula:

Where:

• \( Price \) — Selling price per unit (in currency)
• \( Cost \) — Cost per unit (in currency)

Explanation: The formula calculates what portion of the selling price remains as profit after subtracting the cost.

3. Importance of Profit Margin Calculation

Details: Understanding profit margin helps businesses set appropriate pricing, evaluate product profitability, and make strategic decisions about production and sales.

4. Using the Calculator

Tips: Enter the price and cost in the same currency units. Price must be greater than cost for a valid positive margin.

5. Frequently Asked Questions (FAQ)

Q1: What's a good profit margin?
A: This varies by industry, but generally 10-20% is considered good, while 5% is low and 30%+ is excellent.

Q2: How is this different from markup?
A: Markup is (Price - Cost)/Cost, while margin is (Price - Cost)/Price. Margin shows profit as percentage of revenue.

Q3: Should I include all costs?
A: For accurate per-unit margin, include only direct costs (materials, labor). Fixed costs are considered separately.

Q4: Can margin be over 100%?
A: No, since cost can't be negative, maximum margin approaches but never reaches 100%.

Q5: How often should I calculate margins?
A: Regularly monitor margins, especially when costs change or when evaluating new products/pricing strategies.