Cost Percentage establishes the relationship between cost of goods sold and margin of profit. One of the reasons cost percentage is such a revealing indicator is the inverse of cost percentage is profit margin. As cost percentage increases, profit margin decreases. Cost percentage is used to analyze everything from drink pricing to the profitability of liquor sales.

   Cost percentage is derived by dividing an item’s (liquid portion) cost by its sale price and then multiplying it by 100 to convert it to a percentage.