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Garment Costing Calculator
Full garment cost sheet — fabric, trims, CM, overhead and profit.
CostNest Calculator
Profit Margin Calculator — Garment Orders
Calculate gross margin, markup percentage and total order profit for any garment order. Three modes: find the correct selling price from cost and target margin, reverse-engineer cost from a given price, or measure margin on any cost-price pair. No account needed — numbers update as you type.
Gross margin and markup are mathematically different. Most garment buyers and factories use gross margin (profit as a % of selling price). Always confirm which measure your buyer or finance team is referring to before comparing numbers.
Step By Step
How to Use This Calculator
5 steps
- Choose a calculation mode: Find Selling Price if you know your cost and target margin; Find Cost Price to reverse-engineer from a buyer's target price; or Find Margin to evaluate a cost–price pair you already have.
- Enter cost price per unit — this is your total landed cost before profit (fabric + trims + CM + overhead + freight + agent commission).
- Enter target margin or selling price depending on mode.
- Optionally enter order quantity to see the total profit value for the full order.
- Results show selling price, profit per piece, markup percentage and total order profit.
Worked Example
Worked example — T-shirt order analysis
Use this sample to sanity-check your inputs and understand what the final result represents.
- 1Mode: Find Selling Price
- 2Total cost before profit: $5.80/pc (fabric $3.20 + trims $0.45 + CM $1.60 + freight $0.55)
- 3Target gross margin: 15% → Selling price = $5.80 ÷ (1 − 0.15) = $6.82
- 4Order quantity: 10,000 pcs
Final Result
Selling price: $6.82 · Profit per piece: $1.02 · Markup: 17.6% · Total order profit: $10,200.
Methodology
Margin vs Markup — the critical distinction
This section explains the calculation logic, assumptions, and source material used to make the result more trustworthy and easier to verify.
Gross Margin (%) = (Selling Price − Cost) ÷ Selling Price × 100. Markup (%) = (Selling Price − Cost) ÷ Cost × 100. Selling Price from margin target = Cost ÷ (1 − Margin%). Selling Price from markup target = Cost × (1 + Markup%). The common error is treating a 20% margin as a 20% markup — they are not equivalent: a 20% margin equals a 25% markup, and a 20% markup equals only a 16.7% margin. Reference: Horngren, Datar & Rajan, Cost Accounting: A Managerial Emphasis, 15th ed., Chapter 12.
Practical Guidance
Profit margin discipline in RMG
- 1Bangladesh RMG factories typically operate on gross margins of 8–15% on FOB; net margin (after finance costs and tax) is usually 3–8% per BGMEA financial benchmarking data
- 2Always compute margin as a percentage of selling price, not cost — buyers and factories both use this convention for comparability
- 3Account for potential rework, late delivery penalties and quality rejects before setting margin — these hidden costs can consume 2–5% of revenue on a poorly managed order
- 4Use the Find Cost Price mode to reverse-engineer the maximum cost you can allow if a buyer gives you a firm FOB target — this is the basis for target costing
- 5Minimum viable gross margin for a Bangladesh RMG factory covering all overhead is typically 7–9%; below that, the order is likely contribution-negative once hidden costs are included
- 6Compare margin across styles and buyers quarterly — a low-margin style that consumes disproportionate management time often destroys value even when it appears profitable on paper
Frequently Asked Questions
What is the difference between profit margin and markup?+
Gross margin expresses profit as a percentage of the selling price; markup expresses the same profit as a percentage of cost. If you buy at $5.00 and sell at $6.25: gross margin = ($6.25 − $5.00) ÷ $6.25 = 20%; markup = ($6.25 − $5.00) ÷ $5.00 = 25%. They describe the same transaction but give different numbers. In Bangladesh RMG export practice, FOB negotiations are discussed using gross margin. Internally, some finance teams track markup for pricing authority. Always clarify which metric you are using with your counterpart — Horngren et al. (2015) notes that this confusion is one of the most common sources of pricing disputes.
What profit margin should a garment factory target per order?+
A healthy RMG factory typically targets 10–15% gross margin on FOB value per order. Net profit after factory overhead, interest and corporate tax is usually 3–8%. Knitwear and basic T-shirts tend toward the lower end (8–12%) due to intense buyer price pressure; complex outerwear and tailored garments can justify 12–18% because fewer suppliers can execute them well. BGMEA financial benchmarking (2022–23 survey) found that the median Bangladesh RMG factory net margin was approximately 5.2%.
How do I find the selling price if I know my cost and target margin?+
The correct formula is: Selling Price = Cost ÷ (1 − Target Margin%). For a 15% target margin on a $5.00 cost: $5.00 ÷ (1 − 0.15) = $5.00 ÷ 0.85 = $5.88. The frequent mistake is to multiply: $5.00 × 1.15 = $5.75 — this gives a 13.0% margin, not 15%. The Find Selling Price mode in this calculator uses the correct division formula and shows both margin and markup so the difference is clear.
What hidden costs should I include before calculating margin?+
Many factories undercount costs and report inflated margins. Before calculating margin, include: (1) rework and repair labour (typically 1–3% of CM), (2) fabric rejection and recuts (0.5–2% of fabric cost), (3) late delivery penalties if the shipment is at risk, (4) sampling and development cost amortised over the order, (5) compliance audit costs if buyer-specific (some brands charge audit fees back to the factory), and (6) finance charges on working capital used to buy raw materials before payment is received (30–90 day gap). Including these hidden costs typically reduces apparent gross margin by 2–5 percentage points.
How do buyers negotiate price and how should factories respond?+
Buyers typically counter the first FOB quote with a request to reduce price by 5–15%. Experienced merchandisers build this into their initial quote — the 'first offer' is not the target price but a starting position. When a buyer pushes back, ask for the specific element they want to reduce (fabric specification, CM, or margin) rather than absorbing a blanket cut. If the buyer's target price genuinely doesn't allow your minimum viable margin, it is better to decline politely than to accept a loss-making order. BGMEA advises members not to accept orders below cost even for relationship-building purposes.