How we calculate markup and margin
Markup measures profit over cost; margin measures that same profit over price. Mixing up the two is the most common cause of pricing mistakes.
Use the Markup and Margin CalculatorFormula
profit = price − cost
markup (%) = (profit ÷ cost) × 100
margin (%) = (profit ÷ price) × 100
Variables
- cost
- Total acquisition or production cost of the unit.
- price
- Final selling price.
Step-by-step calculation
- We calculate the absolute profit per unit.
- We divide by cost for markup and by price for margin.
- We present both side by side for direct comparison.
Worked example
Inputs
- Cost: $60
- Price: $100
Calculation
profit = 40
markup = 40 ÷ 60 = 66.67%
margin = 40 ÷ 100 = 40%
A 66.67% markup is equivalent to a 40% margin.
Common mistakes
- Applying a 30% markup expecting a 30% margin — the actual result is 23.08%.
- Comparing a supplier's markup with an internal margin without converting.
Frequently asked questions
How do I convert markup into margin?
margin = markup ÷ (1 + markup), with both expressed as decimals.
All values are in US dollars (US$). Results are estimates and do not replace professional advice.