Margin on costs
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Cost and management accounting.
Margin on costs measures the surplus of revenues over relevant costs, in other words profit, expressed as a percentage of costs.
Margin on costs = profit ÷ costs
Example 1: Margin on costs
Revenues = 100
Costs = 70
The surplus (profit):
= 100 - 70
= 30.
And the margin on costs:
= profit / costs
= 30 / 70
= 42.9%.
Notice the Margin on costs is different from the conventionally expressed Profit margin, which is the percentage profit expressed as a proportion of revenues, taking the same underlying inputs.
Example 2: Profit margin
Revenues = 100
Costs = 70
Surplus (profit):
= 100 - 70
= 30.
Profit margin:
= profit / revenues
= 30 / 100
= 30%.
