Margin and markup describe the same profit from different bases, and confusing them is one of the most common pricing errors. Calculate both from cost and price, or work backward to the price that delivers a target margin or markup.
How it works
Calculate gross margin and markup from cost and price, or set a price from a target margin or markup — and see why the two percentages differ.
Gross margin = (Price − Cost) ÷ Price
Markup = (Price − Cost) ÷ Cost
Price from margin = Cost ÷ (1 − Margin)
Price from markup = Cost × (1 + Markup)
Markup = Margin ÷ (1 − Margin)Common uses
- Retail and wholesale pricing
- Quote and proposal preparation
- Product margin reporting
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Calculate | Margin & markup from cost and price |
| Cost | $64 |
| Selling price | $100 |
| Selling price | $100.00 |
| Gross profit | $36.00 |
| Gross margin | 36.0% |
| Markup on cost | 56.3% |
A 36.0% margin equals a 56.3% markup: margin is measured on price, markup on cost.
Interpreting the results
- Confusing margin and markup is a common pricing error: a 50% markup is only a 33.3% margin.
- Financial statements report gross margin; many pricing policies are written as markups.
Frequently asked questions
What is the difference between margin and markup?
Gross margin is gross profit divided by selling price; markup is gross profit divided by cost. A product costing $64 and selling for $100 has a 36% margin but a 56.3% markup.
How do I convert markup to margin?
Margin equals markup divided by one plus markup. A 50% markup equals a 33.3% margin. To convert the other way, markup equals margin divided by one minus margin.
How do I price for a target margin?
Divide cost by one minus the target margin. To earn a 40% margin on a $60 cost, the price is $60 ÷ 0.60 = $100. Multiplying cost by 1.40 would only produce a 28.6% margin.
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