Margin and markup both describe the same profit, measured against different bases. Margin = profit ÷ selling price; markup = profit ÷ cost. An item that costs $60 and sells for $100 makes $40 of gross profit: a 40% margin but a 66.67% markup. Confusing the two is a common pricing mistake. Adding a 40% markup to a $60 cost gives a price of $84, which is only a 28.6% margin.
This calculator converts in every direction: cost and price to margin and markup, or cost and a target margin or markup to the selling price.
How to use the margin & markup calculator
- Choose what you know besides the cost: the selling price, a target margin or a target markup.
- Enter the unit cost: what you pay for the product, or its direct cost to make.
- Enter the price or the target percentage.
- Read the margin, markup, selling price and gross profit per unit.
Formula
Worked example
Cost $60, selling price $100.
- Profit: $100 − $60 = $40.
- Margin: 40 ÷ 100 = 40.00%.
- Markup: 40 ÷ 60 = 66.67%.
Target a 40% margin on a $60 cost: price = 60 ÷ (1 − 0.40) = $100. Target a 50% markup instead: price = 60 × 1.5 = $90, which is a 33.33% margin.
Margin and markup conversion table
| Markup | Equals margin |
|---|---|
| 25% | 20.0% |
| 33.3% | 25.0% |
| 50% | 33.3% |
| 66.7% | 40.0% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
Margin can never reach 100% (that would mean zero cost), while markup has no upper limit. Gross margin covers only direct cost. Rent, wages and other fixed costs still have to be paid from gross profit; the break-even calculator shows how many units that takes. Planning a sale? The discount calculator shows the price after a discount, and you can check what margin is left with this calculator.
Pricing for a target margin
To hit a target gross margin, divide the cost by (1 − margin). An item that costs $18 needs a price of $18 ÷ (1 − 0.35) = $27.69 for a 35% margin, which is a 53.85% markup. Adding 35% to the cost instead ($24.30) gives only a 25.9% margin, a common pricing mistake.
How discounts eat margin
A discount comes straight out of the gross profit, so the margin falls faster than the price. An item priced at $100 with a $60 cost has a 40% margin. At 20% off the price is $80 and the profit is $20, a 25% margin; the profit per unit fell by half. To keep the same dollar profit after a 20% discount, you would need to sell twice as many units. The discount calculator works out sale prices; the break-even calculator shows how many units cover fixed costs at a given margin.
Caveats and assumptions
- Uses gross margin (price minus direct cost); net margin also subtracts overheads, taxes and interest.
- Enter prices before sales tax.
- Shipping, payment processing and marketplace fees reduce real margin; include them in the cost if they apply per unit.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. $60 cost and $100 price is a 40% margin and a 66.67% markup.
How do I price for a 40% margin?
Divide cost by (1 − 0.40). A $60 cost needs a $100 price.
Is a 50% markup a 50% margin?
No. A 50% markup is a 33.3% margin. A 100% markup (doubling the cost) is a 50% margin.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). 25% markup = 0.25 ÷ 1.25 = 20% margin.
What markup gives a 50% margin?
100%. Doubling the cost (a 100% markup) produces a 50% gross margin.
Sources
- U.S. Small Business Administration — Break-even point — price, variable cost and contribution concepts
- OpenStax Prealgebra 2e — 6.2 Solve General Applications of Percent — percent of a base
This calculator gives estimates for planning and education only. It is not financial, tax or investment advice. Your lender, card issuer, employer or tax authority uses its own terms, fees and rounding, so confirm figures with them before deciding. See our disclaimer and how we build and check calculators.