Blended Margin Calculator

| Added in Business Finance

Understanding Blended Margin

Blended margin provides a comprehensive view of profitability across your entire product portfolio. Unlike individual product margins, blended margin shows the average profit margin when all products are considered together, making it valuable for overall business performance analysis.

Formula

[\text{Blended Margin} = \frac{R - C}{R} \times 100]

Where R is the Average Sales Revenue and C is the Average COGS (Cost of Goods Sold).

The result is expressed as a percentage, representing the overall profit margin across all products.

Example Calculation

Let's calculate the blended margin for a business with the following averages:

  • Average Sales Revenue: $7,500
  • Average COGS: $2,500

Step 1: Calculate the difference between revenue and COGS:

  • $7,500 - $2,500 = $5,000

Step 2: Divide by average sales revenue:

  • $5,000 ÷ $7,500 = 0.6667

Step 3: Multiply by 100 to get the percentage:

  • 0.6667 × 100 = 66.67%

The blended margin is 66.67%, indicating that on average, 66.67% of sales revenue remains after accounting for the cost of goods sold.

Why Blended Margin Matters

  • Strategic Pricing: Understand overall pricing effectiveness across your product mix
  • Profitability Tracking: Monitor how margin changes over time as product mix evolves
  • Business Decisions: Make informed decisions about product portfolio management
  • Performance Benchmarking: Compare your margins against industry standards

Frequently Asked Questions

Blended margin is the overall profit margin across all products in your portfolio, calculated by comparing average sales revenue to average cost of goods sold.

Blended margin is calculated using the formula: ((Average Sales Revenue - Average COGS) / Average Sales Revenue) × 100. This gives you a percentage representing your overall margin.

Use this calculator when you need to understand overall profitability across multiple products, for strategic pricing decisions, or to track margin trends over time.

COGS stands for Cost of Goods Sold, which includes all direct costs associated with producing or purchasing the products you sell, such as materials, labor, and manufacturing costs.