# Machinery Quote Price Calculator from Target Margin and Contingency > Source: https://netray.co/tools/machinery-price-from-target-margin-and-contingency-calculator > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer Compute the selling price of a custom machine that still delivers your target margin after contingency, warranty reserve and sales commission. ## Category cost-finance ## Industry Industrial Machinery ## Audience - Estimator - Sales engineer - OEM finance manager ## Tool **Kind:** calculator **Currency:** $ **Inputs:** #### Purchased material and components **Key:** material **Type:** number **Default:** 210000 **Min:** 0 **Step:** 5000 **Unit:** $ #### Assembly and wiring labor **Key:** labor_hours **Type:** number **Default:** 1100 **Min:** 0 **Step:** 10 **Unit:** hours #### Fully loaded shop labor rate **Key:** labor_rate **Type:** number **Default:** 62 **Min:** 0 **Step:** 1 **Unit:** $ per hour #### Mechanical, electrical and software engineering **Key:** eng_hours **Type:** number **Default:** 650 **Min:** 0 **Step:** 10 **Unit:** hours #### Engineering rate **Key:** eng_rate **Type:** number **Default:** 95 **Min:** 0 **Step:** 1 **Unit:** $ per hour #### Freight, crating and site commissioning cost **Key:** install **Type:** number **Default:** 28000 **Min:** 0 **Step:** 1000 **Unit:** $ #### Contingency on direct cost **Key:** contingency **Type:** slider **Default:** 8 **Min:** 0 **Max:** 30 **Step:** 0.5 **Unit:** % #### Warranty reserve **Key:** warranty **Type:** number **Default:** 2.5 **Min:** 0 **Step:** 0.1 **Unit:** % of price #### Sales commission **Key:** commission **Type:** number **Default:** 3 **Min:** 0 **Step:** 0.1 **Unit:** % of price #### Target margin **Key:** target **Type:** slider **Default:** 28 **Min:** 5 **Max:** 60 **Step:** 1 **Unit:** % of price **Outputs:** #### Direct cost before contingency **Key:** direct **Expr:** material + labor_hours * labor_rate + eng_hours * eng_rate **Format:** currency #### Contingency amount **Key:** cont_amt **Expr:** direct * contingency / 100 **Format:** currency #### Cost base including install **Key:** base_cost **Expr:** direct + cont_amt + install **Format:** currency #### Share of price left for cost **Key:** divisor **Expr:** max(0.01, 1 - (target + warranty + commission) / 100) **Format:** decimal #### Quote price **Key:** price **Expr:** base_cost / divisor **Format:** currency **Primary:** true #### Equivalent markup on cost base **Key:** markup **Expr:** (price / base_cost - 1) * 100 **Format:** percent #### Margin in currency **Key:** margin_amt **Expr:** price * target / 100 **Format:** currency **Primary:** true **Chart:** #### Quote price vs target margin **Type:** line **X:** target **From:** 10 **To:** 50 **Steps:** 21 **Series:** - price **Disclaimer:** Estimating aid. Replace rates and percentages with your own costed standards and review the result with finance before quoting. ## Content **Intro:** The classic pricing error in machine building is adding the margin percentage to cost as if it were a markup. This calculator works backward from the margin on price you want, after contingency, warranty reserve and commission. **Sections:** #### How to use it **Body:** Enter the purchased material total from your bill of materials, assembly hours with a fully loaded shop rate, engineering hours for mechanical, controls and software, and the estimated freight, crating and commissioning cost. Choose a contingency percentage applied to direct cost. Then enter warranty reserve and sales commission as percentages of price, and the margin you want as a percentage of price. The calculator returns the price that delivers exactly that margin, the markup this implies on the cost base and the margin in currency. Move the target slider or read the chart to compare price points. #### Why margin is not markup **Body:** A 28 percent margin on price needs a markup of about 39 percent on cost, not 28. In formula form, price equals cost base divided by one minus the sum of target margin, warranty percent and commission percent, where each is a fraction of price. The calculator therefore divides by the share of price left to pay for cost. Items that scale with price, such as commission, must be in the divisor rather than added to cost, otherwise the real margin on the invoice will be lower than planned. The divisor is protected from falling below 0.01. **Bullets:** - Margin = (price - cost) / price. - Markup = (price - cost) / cost. - Percent-of-price items belong in the divisor. #### Choosing contingency **Body:** Contingency should reflect how well the scope is defined. A repeat design with a stable bill of materials might carry 3 to 5 percent, while a first-of-kind line with software development and unknown customer interfaces may justify 10 to 15 percent or more. Applying it only to direct cost, as here, keeps it separate from the margin so it is visible and can be released if the project finishes well. Do not hide contingency in inflated hours, because it becomes impossible to review later. #### Common mistakes **Body:** Estimators often forget internal engineering hours, price at standard rate rather than loaded rate and omit commissioning travel. They also add margin on top of a price that already includes commission. When a customer asks for a discount, calculate the new price and the new margin in currency before agreeing, because a 5 percent discount on price removes much more than 5 percent of margin. Link your estimate to the ERP item and routing costs so the rates are current. **Cta:** If estimates start in spreadsheets today, we can help connect them to ERP standard costs so every quote uses the same rates. **Faq:** #### What is the difference between margin and markup? **Answer:** Margin is profit divided by selling price, while markup is profit divided by cost. A 25 percent margin equals a 33 percent markup. Mixing them up is one of the most common quoting errors in engineered equipment. #### Should commission be a cost or a percentage of price? **Answer:** It should be modeled as a percentage of price if that is how you pay it. That way, any change in price automatically moves the commission, and your target margin stays correct. Adding it to cost understates the required price. #### How much contingency should I add? **Answer:** Match it to uncertainty. Repeat designs with firm supplier quotes may need very little, while new designs, tight schedules and custom software justify more. Record the reason for the percentage so it can be reviewed after the job. #### Does the quote include currency and tax? **Answer:** No. The calculator is currency neutral and excludes sales tax or VAT. If you buy components in another currency, add a hedge or an exchange rate buffer to material before using the tool. ## Search terms machine quote price calculator, price from target margin, markup vs margin calculator, equipment quote contingency, engineer to order pricing, special machine cost estimate, gross margin on price formula, commission and warranty in price --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json