See what a supplier cost increase does to your margin
If your supplier or vendor raises this item's cost and you keep your selling price unchanged, your gross margin erodes — you earn less profit per sale even though nothing else about the sale changed. This calculator shows that margin erosion and the selling price you would need to maintain the gross margin you had before.
How to read these results
- Previous gross margin is what you earned at the old cost and the current selling price: (selling price − cost) ÷ selling price.
- Current gross margin is the same formula with the new cost, assuming you keep the selling price unchanged — this is your gross margin after the supplier cost increase.
- Margin change is the difference between the two, in percentage points.
- Selling price to maintain your previous margin — also called your target selling price — is the price that keeps the old margin rate: new cost ÷ (1 − previous margin). This is the selling price you need after a supplier cost increase to hold the gross margin you had before.
- Price adjustment needed is the difference between the selling price that maintains your previous margin and your current selling price — the increase, in amount and percent, that would keep the margin unchanged.
The math, made transparent
Gross margin (as a rate):(selling price − cost) ÷ selling price. The gross margin after the cost increase, with the selling price held, uses the new cost. The selling price required to maintain the previous margin is:new cost ÷ (1 − previous margin).
Worked example (numbers are illustrative, in any currency): a cost of $50 sold at $100 earns a 50% margin. If cost rises to $60 and price stays $100, margin falls to 40%. Maintaining the 50% margin needs a selling price of 60 ÷ (1 − 0.5) = $120 — a $20 increase.
What margin erosion means here
Margin erosion is the drop in gross margin that happens when a supplier cost rises and the selling price does not move with it. Revenue per sale looks the same, but profit per sale is smaller — and the erosion compounds across every unit you sell at the old price. This calculator quantifies that erosion for one item: how many margin points it loses, and the selling price that would stop the erosion and restore the margin you had before.
Margin is not markup
Gross margin is profit as a share of the selling price; markup is profit as a share of cost. They are different numbers with different denominators. This calculator uses gross margin only. Confusing the two is a common reason a price increase does not actually protect your margin.
When you should interpret carefully
- Previous cost is zero: the previous margin is 100%, and no single selling price preserves it. Percentage cost change is left blank instead of shown as infinity.
- New cost is zero: no positive selling price preserves a lower margin, so the preserving price is not shown.
- Cost above selling price: margin is negative. The calculator still shows the selling price needed to restore your previous margin.
- Selling price is zero: margin cannot be calculated, and results are left unavailable rather than guessed.
Ready for the full picture? See how to decide between absorbing, passing through, renegotiating, and reviewing sourcing after a supplier price increase.
Want the full analysis method, step by step? See how to analyze a supplier price increase.
This calculator is about the selling-price side of a cost change. For the purchase-cost side — standard cost versus actual cost, per SKU — see purchase price variance and the free template. Dutch-speaking team? See prijsverhoging leverancier marge berekenen.
Frequently asked questions
How much should I raise my price when a supplier cost goes up?
It depends on the gross margin you want to keep. To hold the same margin rate, the selling price is new cost ÷ (1 − previous margin); the calculator shows that figure and how far it is from your current price. Raising the price by only the cash amount of the cost increase usually is not enough, because that keeps the profit per unit fixed while the margin as a percentage still falls. Whether to move all the way to that price, part-way, or not at all is your business decision.
What selling price maintains my gross margin after a cost increase?
Divide the new cost by one minus your previous margin rate: new cost ÷ (1 − previous margin). At that price the new cost earns the same margin rate you had before the increase. The calculator derives it from the previous cost, the new cost, and your current selling price.
How do I calculate gross margin after a supplier cost increase?
Gross margin as a rate is (selling price − cost) ÷ selling price. For the margin after the increase with the selling price unchanged, use the new cost: (selling price − new cost) ÷ selling price. The calculator reports the previous margin, that new margin, and the change between them in percentage points.
What is the difference between a cost increase and a margin decrease?
The cost increase is the change in what you pay the supplier or vendor — an amount and a percentage. The margin decrease is what that does to profitability if the selling price stays the same: gross margin as a share of the selling price falls. A modest cost increase can produce a larger-looking drop in margin points, which is why the two are shown separately.
How do I maintain my margin after a supplier cost increase?
Raise the selling price to new cost ÷ (1 − previous margin) — that is the price at which the new cost earns the same margin rate as before, which is what this calculator solves for. Holding the old selling price instead means accepting the margin erosion the increase causes; some businesses choose to absorb part of it rather than pass on the full amount, which is a pricing decision this calculator does not make for you.
What happens if my previous supplier cost was zero?
The percentage cost change is left blank rather than shown as infinity, and the previous gross margin works out to 100%. No single selling price keeps a 100% margin once there is a real cost, so the margin-maintaining price is not shown in that case.
Have hundreds of SKUs?
This calculator handles one item. To review a supplier cost increase across a full supplier price list, see supplier price list comparison and the guide to comparing two supplier price lists, or run the comparison directly.
See this across your whole supplier price listLooking for other free procurement tools? See the CostRift free tools page.