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%.


See also