Cost Price Calculator

Why accurate cost price is the foundation of profitable pricing

Underpricing is one of the most common and damaging mistakes Australian SMBs make — and it almost always traces back to an incomplete picture of cost. Your true cost price must include direct materials (what you pay suppliers), direct labour (time actually spent producing or delivering), and an allocated share of overhead: rent, utilities, equipment depreciation, insurance, and any indirect labour like supervision. Miss any one of these and your pricing is built on a flawed foundation.

The other critical concept to grasp is the difference between markup and margin. Markup is the profit expressed as a percentage of cost. Margin is the profit expressed as a percentage of selling price. They are not interchangeable. A 50% markup on a AU$100 product gives you a AU$150 selling price and a 33.3% gross margin — not 50%. If your business targets a 40% gross margin, you need to apply a 66.7% markup on cost, not a 40% one. Confusing these two will consistently leave money on the table.

For product businesses buying from overseas suppliers, cost price also needs to account for landed costs — sea freight, customs duty, insurance, and any FX conversion loss on the invoice. AU$ fluctuations against USD or EUR can shift your landed cost by 5–10% without any change to the supplier's quoted price.

How to use this cost price calculator

1. Enter your direct material cost — what you pay per unit for components, raw materials, or goods purchased for resale.
2. Add direct labour cost — the time spent producing or delivering, multiplied by the relevant hourly rate including on-costs.
3. Enter your overhead allocation — divide your total monthly overhead by units produced or hours worked to get a per-unit figure.
4. Choose whether you want to work with a markup percentage or a target margin, then read off your recommended selling price.

What is the difference between markup and margin?

Markup = (Selling Price − Cost) ÷ Cost. Margin = (Selling Price − Cost) ÷ Selling Price. At a AU$150 sell price and AU$100 cost: markup is 50%, margin is 33.3%. When your accountant or buyer talks about "margin", they almost always mean margin, not markup. Setting price using markup when a margin target has been specified will result in systematic underpricing.

How should I allocate overhead to individual products?

The simplest method is to divide total monthly overhead by total units produced. If your facility costs AU$20,000 per month and you produce 500 units, overhead per unit is AU$40. More precise businesses allocate by machine hours or labour hours — particularly useful when product lines use different amounts of production time or equipment. Whatever method you use, apply it consistently across your product range.

Should I include GST in my cost price?

If you are GST-registered, no. Record costs exclusive of GST and price exclusive of GST, then add GST on top when invoicing. GST is a pass-through — it is not a real cost to your business. If you are not GST-registered, the GST you pay on purchases is a real cost and should be included in your cost price calculation.

How does better AP tracking improve cost price accuracy?

Your cost price is only as accurate as the supplier invoices feeding into it. When purchase invoices are manually keyed, costs can be miscoded, duplicated, or missed entirely — which distorts your true cost per unit. Automating accounts payable ensures every invoice is captured and coded correctly, giving you reliable cost data to price from.