Markup vs margin calculator
- Cost
- Price
- Profit
- Markup (profit ÷ cost)
- Margin (profit ÷ price)
Convert markup and margin
- That markup is a margin of
- That margin is a markup of
Markup is profit divided by cost; margin is profit divided by price. A $60 item that costs $40 makes $20 profit: a 50% markup (20 ÷ 40) and a 33.3% margin (20 ÷ 60). When the price is above the cost, the margin is always the smaller number.
Formula
Profit = Price − CostMarkup = (Price − Cost) ÷ CostMargin = (Price − Cost) ÷ PriceMargin = Markup ÷ (1 + Markup)Markup = Margin ÷ (1 − Margin)Price for a target margin = Cost ÷ (1 − Margin)
Worked example
A job costs $300. What price gives a 25% gross margin?
- The cost is 75% of the price.
- $300 ÷ 0.75 = $400.
- Check: $400 − $300 = $100, and $100 ÷ $400 = 25%.
Answer: $400
Do it in your head: Pretend the cost is $100
- Say the cost is $100.
- Add the markup to get the price: a 50% markup makes the price $150.
- Margin is the profit divided by that price.
Markup to margin conversion table
| Markup | Margin | Price on a $100 cost |
|---|---|---|
| 5.26% | 5% | $105.26 |
| 10% | 9.09% | $110 |
| 11.11% | 10% | $111.11 |
| 15% | 13.04% | $115 |
| 17.65% | 15% | $117.65 |
| 20% | 16.67% | $120 |
| 25% | 20% | $125 |
| 30% | 23.08% | $130 |
| 33.33% | 25% | $133.33 |
| 40% | 28.57% | $140 |
| 42.86% | 30% | $142.86 |
| 50% | 33.33% | $150 |
| 60% | 37.5% | $160 |
| 66.67% | 40% | $166.67 |
| 75% | 42.86% | $175 |
| 80% | 44.44% | $180 |
| 100% | 50% | $200 |
| 120% | 54.55% | $220 |
| 150% | 60% | $250 |
| 175% | 63.64% | $275 |
| 200% | 66.67% | $300 |
| 233.33% | 70% | $333.33 |
| 250% | 71.43% | $350 |
| 300% | 75% | $400 |
| 400% | 80% | $500 |
| 900% | 90% | $1,000 |
Try three
-
A rug costs the shop $200 and sells for $500. What is its gross margin percentage?
Show the answer
60%
- Margin divides the profit by the price: ($500 − $200) ÷ $500 = $300 ÷ $500 = 60%.
-
A bakery prices everything at a 300% markup on cost. What is its gross margin percentage? Round to one decimal place if needed.
Show the answer
75%
- Imagine a $100 cost: the price is $400 and the profit is $300.
- Margin = profit ÷ price = $300 ÷ $400 = 75%.
-
Cost of goods sold for a custom order is $1,374. What price gives a 40% gross margin?
Show the answer
$2,290.00
- Cost must be 60% of the price, so price = $1,374 ÷ 0.6 = $2,290.
- Check: ($2,290 − $1,374) ÷ $2,290 = 40%.
That’s the idea. Keep going: 4 warm-up problems, no sign-up →
Learn it properly: Markup Is Not Margin →
Questions
Is a 50% markup a 50% margin?
No. A 50% markup on a $100 cost makes the price $150, and $50 out of $150 is a 33.3% margin. A 50% margin needs a 100% markup.
How do I turn a markup into a margin?
Divide the markup by 1 plus the markup. A 25% markup: 0.25 ÷ 1.25 = 0.2, a 20% margin.
How do I price for a target margin?
Divide the cost by (1 − the margin). For a 25% margin on a $300 cost: $300 ÷ 0.75 = $400. Adding 25% to the cost gives only $375, a 20% margin.
Can a margin be over 100%?
No. The margin is profit as a share of the price, and profit can never be more than the whole price. A markup can be any size: a 300% markup is a 75% margin.
Is gross margin the same as margin?
On one product, yes: price minus cost of goods, divided by price. On a whole business, gross margin is gross profit divided by revenue.