Finance Tools
Raw Material Price Increase Impact Calculator
Calculate how a raw material price increase affects total costs, profit, and profit margin based on material usage and current pricing.
Estimate how a raw material price increase impacts total cost, profit, and margin—useful for stress testing pricing and procurement risk.
Current purchase cost per unit.
Total units consumed per year.
Expected raw material price inflation.
Total annual sales.
Labor, overhead, rent, logistics, etc.
Material cost
Current: $300,000
New: $336,000
Increase: $36,000
Profit impact
Before: $80,000
After: $44,000
Margin: 8.89% → 4.89%
Tip: Try multiple price increase scenarios to identify your cost sensitivity.
How it works
- Material cost = unit cost × annual usage.
- New cost applies the expected price increase.
- Profit impact is calculated assuming revenue is unchanged.
- Margin shows how much pricing power you need to offset inflation.
FAQ
Should revenue change with cost increases?
This tool isolates cost impact. Use a separate pricing tool to model pass-through.
Can I use this for manufacturing or construction?
Yes. Any business with material inputs can apply this framework.
How to use this raw material price increase impact calculator
- Enter current raw material unit cost and annual usage.
- Enter expected price increase percentage.
- Enter current annual revenue and non-material costs.
- Review cost increase, new profit, and margin impact.
Example
A business uses 120,000 units of steel at $2.50/unit. Price rises by 12%. Revenue is $900,000 and other costs are $520,000.
- Current material cost = 120,000 × 2.50 = 300,000
- New unit cost = 2.50 × 1.12 = 2.80
- New material cost = 336,000 (increase of 36,000)
- Profit and margin are recalculated after the cost increase
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