From part cost to list price: enter direct cost, expenses, taxes and the margin you want, and see the target price, the minimum price, how much discount fits and how your price compares with the market.
Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.
Where each part of the price goes, per unit; at the market price, profit is what is left.
Profit margin as % of price when a discount is given on the target price.
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It is the number that turns cost into price when taxes, commissions, expenses and profit are percentages of the price. Markup divisor = 1 − sum of the percentages; price = cost ÷ divisor. In the example the percentages add up to 29.5% and the divisor is 0.705: $16.20 ÷ 0.705 = $22.98.
They are the same calculation seen from two sides: the multiplier is 1 ÷ divisor (1.418 in the example) and is applied to cost. The common mistake is adding the percentages on top of cost (cost × 1.295), which gives $20.98 instead of $22.98 and cuts the real margin to 3.3%.
U.S. sales tax is charged to the buyer on top of the price and remitted to the state, so it never enters the markup; it only changes the final price shown to the customer. Most industrial sales for resale or further manufacturing are exempt with a certificate. Use the "taxes paid out of the price" field only for gross receipts taxes your company bears.
As a % of revenue (annual fixed expenses ÷ annual sales) or as an amount per month divided by units sold. The second makes volume visible: with $25,000 a month over 6,000 units, each unit carries $4.17; over 8,000 units, $3.13.
Direct cost of $16.20 (material, packaging, labor and 6 min of machine time at $65/h), 12% fixed expenses, 7.5% selling expenses and a 10% margin: target price $22.98. The minimum price is $20.12 and the floor $17.51. The market pays $23.50, a bit above target, giving an 11.6% margin.
Down to the minimum price, which covers every expense at zero profit: 12.4% off the target price in the example. Each point of discount comes out of profit: 5% off drops the margin from 10% to 6.3%, and you would need 67% more volume to keep the same cash profit. Below the minimum price, only sell to fill idle capacity, and never below the floor.
It is an estimate using average percentages. It does not handle state-specific gross receipts tax rules, volume rebates, payment-term discounts or price discrimination rules (Robinson-Patman Act). Check pricing policy and tax treatment with your accountant before publishing a price list.
Important notice: Indus Metrics tools produce estimates and pre-sizing results from the data you enter and from published engineering methods. They do not replace design, calculations or reports signed by a licensed professional engineer (PE), nor verification against the applicable codes, standards and regulations, such as OSHA rules and the ASME codes. Material and fuel properties vary: check manufacturer data or your own process analyses before deciding. By using this site you agree to the Terms of Use.
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