How to Add Margin to Cost Using an Excel Formula (4 Examples)

Different Types of Costs

1. Fixed Cost

• Fixed costs remain unchanged regardless of the production level within a specific time period.
• Components of fixed costs include:
  • Rent: Charges for assets rented or leased by the company.
  • Salaries: Regular payments to employees.
  • Insurance Fees: Routine charges for insurance services.
  • Property Tax: Taxes paid to the government based on asset value.
  • Interest Payments: Charges related to loans (become fixed costs if interest rates or payment amounts are fixed).
  • Depreciation: Cost to account for the gradual decrease in asset value over time.
  • Utilities: Regular payments for services like electricity and gas.

2. Variable Cost

• Variable costs change based on production volume.
• Components of variable costs include:
  • Direct Material: Raw materials used in the product.
  • Direct Labor: Wages for workers (variable for temporary contracts, fixed for permanent workers).
  • Billable Staff Wages: Payments based on billable hours (e.g., overtime work or temporary hiring).
  • Commissions: Paid to motivate salespersons based on product sales.
  • Production Supplies: Tools and supplies that vary with production levels.
  • Shipping Cost: Varies with the number of units shipped.

3. Operating Cost

• Ongoing expenses associated with daily business operations.

4. Total Cost

• The sum of all costs incurred to achieve a specific output level.

An organization’s profit from the sale of its products and services is known as the sales margin. The equation for calculating the margin is:

Margin (%)= (Selling Price- Cost)/ Selling Price

• To calculate the margin, we will enter the following formula in the cell E5:

This calculates the margin percentage.

• Press Enter.

• Drag the Fill Handle icon to apply the formula to other cells if needed.

General Formula to Add Margin to Cost

The general formula for adding a margin to cost is given below:

Cost After Adding Margin = (Cost)/(1-Margin)

Using the above formula, you will be able to add margin to cost.

Example 1 – Adding Margin to Variable Cost

• Dataset Introduction:
  • Imagine we have an Excel dataset with columns for Particulars, Cost, Margin, and Cost (After Adding Margin).
  • We’ll use the SUM function to calculate total costs.

• Calculating Cost After Adding Margin:
  • In cell E5, enter the formula:

This calculates the cost after adding the margin.

• • Press Enter.

• • Drag down the Fill Handle icon to apply the formula to other cells (if needed).

• Total Variable Cost Without Margin:
  • In cell D13, enter the formula:

This gives the total variable cost without adding a margin.

• • Press Enter.

• Total Variable Cost After Adding Margin:
  • In cell D14, enter the formula:

This provides the total variable cost after adding a margin.

• • Press Enter.

Example 2 – Adding Margin to Fixed Cost

• Calculating Cost After Adding Margin:
  • Similar to the variable cost, enter the formula in cell E5:

• • Press Enter. 

• • Drag down the Fill Handle icon.

• Total Fixed Cost Without Margin:
  • In cell D14, enter the formula:

This gives the total fixed cost without adding a margin.

• • Press Enter.

• Total Fixed Cost After Adding Margin:
  • In cell D15, enter the formula:

This provides the total fixed cost after adding a margin.

• • Press Enter.

Example 3 – Adding Margin to Operating Cost

• Dataset Introduction:
  • Imagine we have an Excel dataset with columns for Items, Operating Cost, Margin, and Cost (After Adding Margin).
  • We’ll use the SUM function to calculate total costs.

• Calculating Cost After Adding Margin:
  • In cell E5, enter the formula:

This calculates the cost after adding the margin.

• • Press Enter.

• • Drag down the Fill Handle icon to apply the formula to other cells (if needed).

• Total Operating Cost Without Margin:
  • In cell D13, enter the formula:

This gives the total operating cost without adding a margin.

• • Press Enter.

• Total Operating Cost After Adding Margin:
  • In cell D14, enter the formula:

This provides the total operating cost after adding a margin.

• • Press Enter.

Example 4 – Adding Margin to Total Cost

• Calculating Cost After Adding Margin:
  • Similar to the operating cost, enter the formula in cell

• • Press Enter.

• • Drag down the Fill Handle icon.

• Total Cost Without Margin:
  • In cell D13, enter the formula:

This gives the total cost without adding a margin.

• • Press Enter.

• Total Cost After Adding Margin:
  • In cell D14, enter the formula:

This provides the total cost after adding a margin.

• • Press Enter.

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