**Profit on return is calculated by subtracting a unit's selling price from the cost to produce, dividing that difference by the selling price and multiplying that number by 100.** This equation gives the percentage margin of profit made on each unit.

The profit on return equation can be used to set a selling price per product based on the target margin. For example, to get a minimum 60 percent profit margin on a unit that costs $2 to produce, the unit sales price must be at least $5.

Profit on return is similar to gross profit margin, which calculates a percentage margin of total net sales of a company compared to the total cost of goods. This gives an overall margin on everything sold, whereas profit on return gives the margin on a single unit.