Which costs belong in the cost field: just the purchase price, or packaging and rent too?
Enter everything you pay because one unit was sold: the purchase price, the box, the label, the card in the parcel and any per-item fee. Rent, subscriptions and salaries do not belong in a unit's cost, because you pay them whether you sell one unit or a hundred. They belong in a break-even calculation.
The rule in one question
Ask: if I sold one more unit today, would I pay this amount again? If yes, it is a variable cost and it goes in the cost field. If no, it is a fixed cost and does not belong to any single unit.
- In the cost: the product's purchase price, inbound freight spread across units, the box or bag, the label, the thank-you card, ribbon, per-transaction payment fees, and any shipping you cover for the customer.
- Not in the cost: warehouse or shop rent, the monthly store platform subscription, fixed salaries, a product photo shoot, the label printer itself.
Example: a leather bag
You buy a bag for 45 and sell it for 89. In the Profit margin calculator with the purchase price alone:
Cost 45 and price 89: profit 44, margin 49.44%.
Add a gift box at 4, a label at 1.5, and a card and dust bag at 2. Cost is 52.5.
Cost 52.5 and price 89: profit 36.5, margin 41.01%.
Seven and a half in 'little things' took more than eight points of margin. Many sellers skip them because they are bought in bulk every few months and feel separate from the product. Divide the packaging invoice by the number of units it covers to find each unit's share.
So where do fixed costs go?
Loading rent onto each unit gives a figure that shifts every month with sales, and misleads you. The clearer question is: how many units must I sell to cover these costs? The per-unit profit the margin calculator shows is exactly what each sale contributes towards them.
Say your fixed monthly costs are 1500, and each sale contributes a profit of 36.5.
In the Break-even calculator: you need 42 bags a month to cover them.
Every bag after that is profit before tax.
The in-between cases
- Advertising: if you pay for results, the average per order is a variable cost you can add. If it is a fixed brand budget, treat it as fixed.
- A marketplace's flat monthly fee is fixed; its commission on each order is variable.
- Your own time is not in the calculator. But if you pay someone per order to pack parcels, that is a variable cost.
To get an accurate total of your fixed costs before working out break-even, log them in the Expense summary generator.
Common questions
Do I include shipping the customer pays?
If the customer pays it in full and it passes to the courier, it is in neither your cost nor your price. Enter only the part you absorb.
Do I include VAT on purchases?
If you reclaim it, no; otherwise it is a cost. Check your tax position with your accountant.