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 76.0% of capacity (Federal Reserve, Jul 2026). New factory orders are up 7.4% 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 2026-07-13.