What is Margin: Definition, Functions, and Examples of Calculating

Margin is one of the terms in business related to profit. Of course, related to the purpose of running a business, namely to make a profit. You can find out the benefits obtained in various ways.

One of them is by calculating the margin. Usually, the margin is presented as a percentage. Margin relates to products sold, production costs, profits, and more. Here's an article about margins.

Definition of Margin

Margin is a term that is often used in business. Margin itself means the level of difference between the amount of production costs and the selling price in the market. in addition to the functions and benefits you also have to know how to calculate margin in business. In the realm of investment, margin is defined as a deposit by investors to pay for the purchase price of shares.

Margin Function

Margin has an important role in the business field. Here is the margin function.

1. Determine the Number of Products

Margin is used to determine the number of products to be sold. Given, margin can take into account losses and profits. Thus, the products sold can be determined so that there is no loss.

2. Define Marketing

Furthermore, margin serves to determine the marketing strategy of the products and services being sold. If the margin obtained is very thin, the company can adjust its marketing strategy by considering the budget.

3. Determining the Price

Third, margin serves to determine the selling price of a product or service. Margin can take into account the selling price of the product with several considerations in order to determine the price of the product correctly.

Example of Calculating Margin

A shoe factory is able to sell 20.000 pairs of shoes for one month at a unit price of Rp. 40.000. Production and marketing costs amounted to Rp.300.000. What is the resulting margin?

Margin= IDR 100.000 : IDR 300.000 X 100% = 33,3%

Well, here's an article about margins. The higher the margin obtained, the greater the profit received by the company. Hopefully the article above is useful, yes!

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