Margin and markup describe the same profit from two different angles, and confusing them leads to underpricing. Profit margin measures profit as a share of the selling price, while markup measures profit as a share of the cost. The Profit Margin Calculator computes both at once so you can price with confidence and compare products on a consistent basis.
The two formulas
Both start with the same gross profit, which is selling price minus cost. The difference is the denominator. Margin divides profit by the price; markup divides the same profit by the cost. Because price is always larger than cost, the margin percentage is always lower than the markup percentage for the same product.
margin % = (price - cost) / price * 100 markup % = (price - cost) / cost * 100
Margin vs markup, made clear
Say a product costs 60 and sells for 100. The gross profit is 40. The margin is 40 / 100 = 40 percent, but the markup is 40 / 60 = 66.7 percent. Same product, same profit, two very different percentages. If you mistake a target margin for a markup, you will set the price too low and erode your earnings.
How to use the Profit Margin Calculator
- Enter the cost, what you paid to acquire or produce the item.
- Enter the selling price you charge the customer.
- Read the profit margin percentage and the markup percentage side by side.
- Adjust the price to hit a target margin and watch both figures update.
A worked example
A retailer buys a jacket for 80 and lists it at 120. Gross profit is 40. Margin is 40 / 120 = 33.3 percent. Markup is 40 / 80 = 50 percent. If the goal was a 40 percent margin, the price is too low: solving for price gives cost / (1 - 0.40) = 80 / 0.60 = 133.33. Knowing which figure your target refers to is the whole game.
Pricing with the right number
Use margin to judge profitability and compare across a catalog, and use markup to build a price up from cost. The calculator shows both so you never mix them up, and it runs entirely in your browser, keeping your cost and pricing data on your own device.
