How it’s calculated
Markup and margin describe the same profit with different denominators: markup divides profit by cost, margin divides it by selling price. Writing price = cost + profit gives the conversions:
| Markup | Margin |
|---|---|
| 25% | 20% |
| 33.33% | 25% |
| 50% | 33.33% |
| 100% | 50% |
| 150% | 60% |
Example: a 25% markup turns a cost of 80 into a price of 100. Profit 20 ÷ price 100 = 20% margin.
Frequently asked questions
What is the difference between margin and markup?
Markup is profit as a percentage of cost; margin is profit as a percentage of selling price. A 25% markup is only a 20% margin.
Why is markup always higher than margin?
For a profitable sale the cost is smaller than the price, so dividing the same profit by the cost gives a larger percentage.
Can margin be more than 100%?
No. Markup can be 200% or 500%, but margin approaches 100% only as cost approaches zero.
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Sources
- Contemporary Mathematics, 6.2: Discounts, Markups, and Sales Tax — OpenStax
- Principles of Accounting, Volume 1, 6.6: Multi-Step and Simple Income Statements for Merchandising Companies (gross margin) — OpenStax
Formulas are taken from the free public references above. Results are provided “as is” for informational and educational purposes only. See our disclaimer.
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