How to use this calculator
- Enter or choose units bought.
- Enter or choose landed cost per unit.
- Enter or choose full selling price (excl. sales tax).
- Enter or choose sold at full price.
- Enter or choose sold on markdown.
- The gross margin updates as you type. Use Copy result or Share to keep it.
Method
Sales = Full units × Price + Markdown units × Price × (1 − Markdown%); COGS = Units sold (or all units if written off) × Cost; GM% = (Sales − COGS) ÷ Sales
- IMU
- initial markup on retail: (Price − Cost) ÷ Price
- Sell-through
- share of units bought that sold
Worked example
- Full price: 600 × 40 = 24,000. Markdown: 300 × 24 = 7,200. Sales = 31,200.
- COGS = 900 sold × 12 = 10,800.
- Gross margin = 20,400 ÷ 31,200 = 65.38%, against an initial markup of 70%.
Markdowns cut the margin from a 70% initial markup to 65.4% realised, with 100 units left in stock.
What the result means
The gap between initial markup and realised margin is the cost of markdowns. Writing off unsold stock shows the margin if the leftovers have no value.
Assumptions and limits
- Prices and sales exclude VAT or sales tax.
- All markdown sales are at the one average markdown.
- Returns, shrinkage, promotions and staff discounts are not included.
Questions
What is the difference between markup and margin?
Markup is profit over cost; margin is profit over price. Fashion retailers usually quote markup on retail, which is the same calculation as margin.
Why keep unsold stock as inventory?
Under standard accounting, unsold units stay on the balance sheet at cost until sold or written down, so they are not in COGS.