How do you calculate gross margin on a quote?

Subtract unit cost from selling price and divide by the selling price. At $12.40 cost and $18.75 price, that is $6.35 ÷ $18.75 = 33.87% gross margin.

What is the difference between margin and markup?

Margin is profit as a percent of price; markup is profit as a percent of cost. The same $6.35 spread on a $12.40 cost is a 33.87% margin but a 51.21% markup — always confirm which one a customer or boss means.

What price do I need for a 32% target margin?

Divide cost by (1 − target margin): $12.40 ÷ 0.68 = $18.24. Since the actual $18.75 quote already yields 33.87%, you are comfortably above the 32% target.

What is a good gross margin for a machine shop?

It varies, but contract manufacturers often target 25-40% gross margin on parts, leaving room for SG&A and overhead recovery. The 33.87% here sits in a healthy band for moderate-volume work.

How much gross profit does the run make?

Multiply the per-unit spread by volume: $6.35 × 5,000 units = $31,750 of gross profit on this quote, before overhead allocation.

Why does raising price 5% raise margin more than 5 points?

Price sits in the denominator of margin, so a price increase lifts the numerator (profit) and shrinks the cost share simultaneously — the margin gain outpaces the percentage price change, which is why small price moves matter so much on thin-margin parts.

Costing calculator

Quote Margin Calculator

Quote margin is the percentage of each selling dollar that remains after the unit cost of producing the part — the single number that tells you whether a job is worth running. Estimators and sales engineers in manufacturing confuse margin and markup constantly, and the gap is real money: a 50% markup is only a 33% margin. This calculator gives you both, plus the price you'd need to hit a target margin and the total gross profit across the quoted volume. It matters because in a competitive RFQ, mispricing by a few points on thousands of units is the difference between winning profitably and winning at a loss.

What this calculator does

Calculate gross margin, markup, target price, and margin gap for a manufacturing quote.
Use before sending a quote or deciding whether a requested price meets the target margin.
It computes gross margin and markup from a unit cost and selling price, the price required to hit a target margin, and total gross profit over the quoted volume.

Formula used

Gross margin = (price − cost) ÷ price
Markup = (price − cost) ÷ cost
Target price = cost ÷ (1 − target margin)
Gross profit = (price − cost) × volume

Inputs explained

Unit cost: undefined
Selling price: undefined
Target margin: undefined
Quote volume: undefined

How to use the result

Use it while pricing an RFQ or PO line to confirm a quote clears your target margin and to see the dollar profit a volume commitment delivers.
It uses a single unit cost and price, so it ignores cost tiers, scrap allowance, freight, and payment-term effects — it is a gross-margin check, not a landed-net-profit model.

Current U.S. benchmarks

U.S. manufacturing runs at 75.6% of capacity (Federal Reserve, May 2026). New factory orders are up 2.3% year over year (Census).

Common questions

How do you calculate gross margin on a quote? Subtract unit cost from selling price and divide by the selling price. At $12.40 cost and $18.75 price, that is $6.35 ÷ $18.75 = 33.87% gross margin.
What is the difference between margin and markup? Margin is profit as a percent of price; markup is profit as a percent of cost. The same $6.35 spread on a $12.40 cost is a 33.87% margin but a 51.21% markup — always confirm which one a customer or boss means.
What price do I need for a 32% target margin? Divide cost by (1 − target margin): $12.40 ÷ 0.68 = $18.24. Since the actual $18.75 quote already yields 33.87%, you are comfortably above the 32% target.
What is a good gross margin for a machine shop? It varies, but contract manufacturers often target 25-40% gross margin on parts, leaving room for SG&A and overhead recovery. The 33.87% here sits in a healthy band for moderate-volume work.
How much gross profit does the run make? Multiply the per-unit spread by volume: $6.35 × 5,000 units = $31,750 of gross profit on this quote, before overhead allocation.

Last reviewed 2026-05-12.