Margin vs markup: one profit, two denominators
Margin divides profit by revenue; markup divides the same profit by cost. Buying for 80 and selling for 100 produces a 20% margin and a 25% markup.
Margin vs markup: one profit, two denominators
| Cost | Selling price | Profit before other costs | Margin | Markup |
|---|---|---|---|---|
| 100.00 | 110.00 | 10.00 | 9.09% | 10.00% |
| 100.00 | 120.00 | 20.00 | 16.67% | 20.00% |
| 100.00 | 125.00 | 25.00 | 20.00% | 25.00% |
| 100.00 | 150.00 | 50.00 | 33.33% | 50.00% |
| 100.00 | 200.00 | 100.00 | 50.00% | 100.00% |
Formula & method
Profit = price − cost
Margin% = profit ÷ price × 100
Markup% = profit ÷ cost × 100
Margin fraction = markup fraction ÷ (1 + markup fraction)Decide which costs the input represents. A product-cost calculation produces a product-level margin; it is not automatically the company’s net profit margin after overhead and taxes. The table fixes cost at 100 currency units so that the denominator difference is easy to inspect.
To set a target margin m, expressed as a fraction, price equals cost divided by one minus m. A 50% margin therefore requires a price twice the cost. A 50% markup only requires a price one and a half times the cost.
Worked example
A cost of 60 with a target margin of 40% needs a price of 60 ÷ 0.60 = 100. Adding a 40% markup would set the price at 84 and yield a margin of 28.57%.
What can change the answer
The ordinary positive-cost model requires cost above zero and a target margin below 100%. Other costs and rounding can change the actual profit.
Sources & definitions
Method checked:
Continue with a related task
Markup Calculator
Markup equals selling price minus cost, divided by cost, multiplied by 100. Buying at 80 and selling at 100 gives a 25% markup, while the margin is 20%.
Percentage Calculator
Calculate a percentage of a base value and the value after that percentage is added or removed. Enter a negative base only when it makes sense for your task.
Gross Margin Calculator
Gross margin is revenue minus included cost of goods, divided by revenue, multiplied by 100. Revenue of 1,000 and cost of 650 gives a gross profit of 350 and margin of 35%.
Target Margin Selling Price Calculator
Required selling price equals unit cost divided by one minus the target-margin fraction. A cost of 60 and a 40% target margin gives a price of 100.