How to work out your margin when factories quote in different currencies
When one factory quotes in Hong Kong dollars, another in renminbi and your customer pays in US dollars, the margin hides in the conversion. Here is how to get it right before you quote.
The formula
Convert every factory price to your selling currency, then compare it to the selling price:
Cost in USD = factory price ÷ exchange rate (factory currency per 1 USD)
Margin % = (selling price − cost in USD) ÷ selling price × 100
A worked example
You sell a woven label at USD 0.135 per piece, for 10,000 pieces. Three factories quote:
| Factory | Quote | Rate per USD | Cost in USD | Margin |
|---|---|---|---|---|
| Factory A | HKD 0.78 | 7.80 | 0.1000 | 25.9% |
| Factory B | RMB 0.66 | 7.10 | 0.0930 | 31.1% |
| Factory C | RMB 0.74 | 7.10 | 0.1042 | 22.8% |
Factory B is only 0.7 US cents cheaper per piece than Factory A, but that is the difference between a 26% and a 31% margin. On 100,000 pieces it is about USD 700.
Three mistakes that hide margin
- Mixing units. One factory quotes per piece, another per 1,000 pieces. Put every quote on the same unit before converting.
- Using today's rate for an order paid in 60 days. Agree which rate you cost at (for example a monthly costing rate) and add a buffer for currencies that move.
- Ignoring quantity tiers. Factories price 5,000, 10,000 and 25,000 pieces differently. Compare at the quantity the customer will actually order.
Do it once, not in every spreadsheet
Keep one costing rate per currency, one unit per product and one comparison per quantity. Whoever quotes the customer should see the margin, not rebuild it.
In BOEY, factory replies are converted at your rates and compared side by side, with the margin at each quantity, before anyone quotes the customer.