Finance Tools
Material Cost Increase Profit Impact Calculator
Estimate how an increase in material costs changes profit, profit margin, and required price pass-through to maintain margin.
Estimate how a material cost increase affects profit and margin. Includes a simple price pass-through estimate to maintain your original margin.
Total annual sales.
Raw materials, components, or key inputs.
Labor, overhead, rent, logistics, admin, etc.
Applies only to the material cost portion.
Profit & margin
Profit: $180,000 → $138,000
Profit change: -$42,000
Margin: 18.00% → 13.80%
Material cost
Current: $280,000
New: $322,000
Increase: $42,000
Price pass-through (simple)
Required revenue (to keep original margin): $1,051,220
Required revenue increase: $51,220 (5.12%)
This is a simplified estimate assuming volume stays constant.
Tip: The 'required revenue increase' is a simple pass-through estimate—real markets may not allow full pass-through.
How it works
- New material costs = material costs × (1 + increase%).
- New profit = revenue − (new material costs + other costs).
- Required revenue keeps your original margin constant (simple pass-through estimate).
FAQ
What if I can’t raise prices?
Then margin compresses. Use the “profit change” and “new margin” as your downside estimate.
What if volume changes when I raise prices?
This tool assumes constant volume. For pricing elasticity, use a separate demand model tool.
How to use this material cost increase profit impact calculator
- Enter annual revenue, material costs, and other costs.
- Enter expected material cost increase percentage.
- Review new profit and margin after the cost increase.
- See the price pass-through needed to keep your original margin.
Example
Revenue is $1,000,000 with $280,000 material costs and $540,000 other costs. Materials rise by 15%.
- Current profit = 1,000,000 − (280,000 + 540,000) = 180,000
- New material costs = 280,000 × 1.15 = 322,000
- New profit = 1,000,000 − (322,000 + 540,000) = 138,000
- Calculator estimates required revenue increase to keep the original margin
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